Document and Entity Information
Document and Entity Information | 3 Months Ended |
Dec. 31, 2018 | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | NEUROONE MEDICAL TECHNOLOGIES Corp |
Entity Central Index Key | 1,500,198 |
Trading Symbol | NMTC |
Amendment Flag | false |
Document Type | S1 |
Document Period End Date | Dec. 31, 2018 |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Ex Transition Period | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | |||
Cash | $ 350,576 | $ 13,260 | $ 26,467 |
Prepaid expenses | 32,192 | 5,378 | 7,146 |
Total current assets | 382,768 | 18,638 | 33,613 |
Intangible assets, net | 194,770 | 200,081 | 216,372 |
Total assets | 577,538 | 218,719 | 249,985 |
Current liabilities: | |||
Accounts Payable | 470,345 | 221,235 | |
Accrued expenses | 1,740,893 | 1,591,022 | 1,021,617 |
Unsecured loans | 528,000 | 283,000 | 253,000 |
Convertible promissory notes, net and accrued interest | 1,657,828 | 1,393,804 | 2,168,340 |
Premium conversion derivatives | 314,660 | 308,395 | 462,174 |
Total current liabilities | 4,711,726 | 3,797,456 | 3,905,131 |
Warrant liability | 823,844 | 817,155 | 1,381,465 |
Total liabilities | 5,535,570 | 4,614,611 | 5,286,596 |
Commitments and contingencies (Note 4) | |||
Stockholders' deficit: | |||
Preferred stock | |||
Common stock | 10,037 | 9,657 | 7,865 |
Additional paid-in capital | 6,842,465 | 6,052,161 | 280,320 |
Accumulated deficit | (11,810,534) | (10,457,710) | (5,324,796) |
Total stockholders' deficit | (4,958,032) | (4,395,892) | (5,036,611) |
Total liabilities and stockholders' deficit | $ 577,538 | $ 218,719 | $ 249,985 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | |||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | |||
Preferred stock, shares outstanding | |||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, shares issued | 10,036,505 | 9,656,505 | 7,864,994 |
Common stock, shares outstanding | 10,036,505 | 9,656,505 | 7,864,994 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Operating expenses: | |||||
General and administrative | $ 866,679 | $ 538,859 | $ 2,676,872 | $ 1,798,131 | $ 2,336,988 |
Research and development | 209,168 | 234,925 | 715,086 | 500,408 | 735,333 |
Total operating expenses | 1,075,847 | 773,784 | 3,391,958 | 2,298,539 | 3,072,321 |
Loss from operations | (1,075,847) | (773,784) | (3,391,958) | (2,298,539) | (3,072,321) |
Interest expense | (264,023) | (338,113) | (763,065) | (1,057,024) | (1,395,138) |
Net change in fair value for the warrant liability and premium conversion derivatives | (12,954) | (162,547) | 336,596 | (77,505) | (240,053) |
Loss on note extinguishments, net | (350,914) | (1,314,487) | (350,914) | ||
Net loss | $ (1,352,824) | $ (1,625,358) | $ (5,132,914) | $ (3,433,068) | $ (5,058,426) |
Net loss per share: | |||||
Basic and diluted | $ (0.14) | $ (0.21) | $ (0.61) | $ (0.55) | $ (0.77) |
Number of shares used in per share calculations: | |||||
Basic and diluted | 9,763,244 | 7,864,994 | 8,420,529 | 6,217,076 | 6,610,072 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) | Common Stock | Additional Paid–In Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2016 | $ 31 | $ 119 | $ (266,370) | $ (266,220) |
Balance, shares at Dec. 31, 2016 | 5,216,565 | |||
Net loss | (3,433,068) | |||
Balance at Sep. 30, 2017 | $ 7,865 | 162,741 | (3,699,438) | (3,528,832) |
Balance, shares at Sep. 30, 2017 | 7,864,994 | |||
Balance at Dec. 31, 2016 | $ 31 | 119 | (266,370) | (266,220) |
Balance, shares at Dec. 31, 2016 | 5,216,565 | |||
Issuance of stock in connection with intellectual license agreement | $ 860 | 22,555 | 23,415 | |
Issuance of stock in connection with intellectual license agreement, shares | 859,976 | |||
Issuance of restricted stock award | $ 215 | 7,005 | 7,220 | |
Issuance of restricted stock award, shares | 215,453 | |||
Transfer of shares in connection with merger | $ 1,573 | (1,573) | ||
Transfer of shares in connection with merger, shares | 1,573,000 | |||
Par value change in connection with merger | $ 5,186 | (5,186) | ||
Stock-based compensation | 69,574 | 69,574 | ||
Issuance of warrants | 61,496 | 61,496 | ||
Issuance of additional warrants in connection with short-term notes modification | 117,280 | 117,280 | ||
Forgiveness of subscription receivable | 9,050 | 9,050 | ||
Net loss | (5,058,426) | (5,058,426) | ||
Balance at Dec. 31, 2017 | $ 7,865 | 280,320 | (5,324,796) | (5,036,611) |
Balance, shares at Dec. 31, 2017 | 7,864,994 | |||
Balance at Sep. 30, 2017 | $ 7,865 | 162,741 | (3,699,438) | (3,528,832) |
Balance, shares at Sep. 30, 2017 | 7,864,994 | |||
Issuance of additional warrants in connection with short-term notes modification | 117,280 | 117,280 | ||
Stock value adjustment associated with intellectual license agreement | 299 | 299 | ||
Net loss | (1,625,358) | (1,625,358) | ||
Balance at Dec. 31, 2017 | $ 7,865 | 280,320 | (5,324,796) | (5,036,611) |
Balance, shares at Dec. 31, 2017 | 7,864,994 | |||
Issuance of common stock upon short term notes and convertible notes extinguishments | $ 1,147 | 2,348,790 | 2,349,937 | |
Issuance of common stock upon short term notes and convertible notes extinguishments, shares | 1,146,311 | |||
Issuance of warrants and reclassification of warrant liability in connection with short-term notes and convertible notes extinguishments | 2,008,796 | 2,008,796 | ||
Issuance of common stock under 2018 private placement | $ 445 | 824,449 | 824,894 | |
Issuance of common stock under 2018 private placement, shares | 445,200 | |||
Issuance of warrants under 2018 private placement | 288,106 | 288,106 | ||
Issuance costs related to 2018 private placement | (173,067) | (173,067) | ||
Issuance of common stock for consulting services | $ 200 | 469,300 | 469,500 | |
Issuance of common stock for consulting services, shares | 200,000 | |||
Stock-based compensation | 5,467 | 5,467 | ||
Net loss | (5,132,914) | (5,132,914) | ||
Balance at Sep. 30, 2018 | $ 9,657 | 6,052,161 | (10,457,710) | (4,395,892) |
Balance, shares at Sep. 30, 2018 | 9,656,505 | |||
Issuance of common stock under 2018 private placement | $ 330 | 601,319 | 601,649 | |
Issuance of common stock under 2018 private placement, shares | 330,000 | |||
Issuance of warrants under 2018 private placement | 223,351 | 223,351 | ||
Issuance costs related to 2018 private placement | (149,316) | (149,316) | ||
Issuance of common stock for consulting services | $ 50 | 114,950 | 115,000 | |
Issuance of common stock for consulting services, shares | 50,000 | |||
Net loss | (1,352,824) | (1,352,824) | ||
Balance at Dec. 31, 2018 | $ 10,037 | $ 6,842,465 | $ (11,810,534) | $ (4,958,032) |
Balance, shares at Dec. 31, 2018 | 10,036,505 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Operating activities | |||||
Net loss | $ (1,352,824) | $ (1,625,358) | $ (5,132,914) | $ (3,433,068) | $ (5,058,426) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||
Amortization | 5,311 | 4,265 | 16,291 | 13,368 | 17,633 |
Stock-based services expense | 118,980 | 486,120 | 76,794 | 76,794 | |
Forgiveness of subscription | 9,051 | 9,050 | |||
Non-cash interest on convertible notes | 30,800 | 39,508 | 152,045 | 76,359 | 115,867 |
Non-cash discount amortization on short-term notes convertible notes | 233,223 | 298,605 | 611,020 | 943,427 | 1,242,031 |
Note issuance costs attributed to warrant liability and to convertible promissory note modification | 38,119 | 38,119 | |||
Revaluation of premium conversion derivatives | 6,265 | (108,175) | (371,831) | 90,212 | (17,962) |
Revaluation of warrant liability | 6,689 | 270,722 | 35,235 | (12,707) | 258,015 |
Loss on term notes extinguishments | 350,914 | 1,314,487 | 350,914 | ||
Change in assets and liabilities: | |||||
Prepaid expenses | (26,814) | ||||
Accounts payable and accrued expenses | 278,686 | 171,115 | |||
Prepaid expenses and other assets | 1,768 | 46,677 | 46,677 | ||
Accounts payable | 221,235 | ||||
Accrued expenses | 437,337 | 642,099 | 813,215 | ||
Net cash used in operating activities | (699,684) | (598,404) | (2,229,207) | (1,509,669) | (2,108,073) |
Investing activities | |||||
Purchase of intangible assets | (91,709) | (55,000) | (91,709) | ||
Net cash used in investing activities | (91,709) | (55,000) | (91,709) | ||
Financing activities | |||||
Proceeds from issuance of convertible promissory notes | 328,429 | 432,849 | 675,705 | 1,004,134 | |
Proceeds from issuance of warrants associated with convertible notes | 336,571 | 442,151 | 440,919 | 777,490 | |
Proceeds from issuance of warrants associated with short-term notes | 61,496 | 61,496 | |||
Proceeds from issuance of common stock in connection with private placement | 601,649 | 824,894 | |||
Proceeds from issuance of warrants in connection with private placement | 223,351 | 288,106 | |||
Proceeds from unsecured loans | 245,000 | 283,000 | (50,000) | (50,000) | |
Issuance costs related to short-term note | (3,030) | (3,030) | |||
Issuance costs related to convertible notes | (9,779) | (35,689) | (45,468) | ||
Issuance costs related to warrants | (8,670) | (31,920) | (40,590) | ||
Proceeds from advances related to private placement | 40,000 | ||||
Issuance costs related to private placement | (73,000) | ||||
Net cash provided by financing activities | 1,037,000 | 646,551 | 2,271,000 | 1,057,481 | 1,704,032 |
Net increase (decrease) in cash | 337,316 | (43,562) | (13,207) | (452,188) | (495,750) |
Cash at beginning of period | 13,260 | 70,029 | 26,467 | 522,217 | 522,217 |
Cash at end of period | 350,576 | 26,467 | 13,260 | 70,029 | 26,467 |
Supplemental non-cash financing and investing transactions: | |||||
Bifurcation of premium conversion derivative related to convertible notes | 128,525 | 168,384 | 213,961 | 342,486 | |
Issuance of warrants in connection with convertible notes | 117,280 | ||||
Stock value adjustment associated with intellectual license agreement | 299 | ||||
Accrued issuance costs attributed to private placement and convertible notes | 76,316 | 14,226 | |||
Conversion of short-term notes and convertible promissory notes into common stock | 2,063,361 | ||||
Issuance of additional warrants in connection with short-term notes and convertible promissory notes modifications | 829,378 | 117,280 | |||
Purchased intangible assets in accrued expenses | $ 30,000 | 30,000 | |||
Common stock issued for the purchase of intangible assets | 23,115 | 23,415 | |||
Accrued issuance costs related to private placement | 173,067 | ||||
Accrued issuance costs attributed to short-term promissory notes and convertible promissory notes | 2,850 | 42,811 | 57,037 | ||
Accrued issuance costs attributed to warrant liability | $ 38,119 | $ 38,119 |
Description of Business and Bas
Description of Business and Basis of Presentation | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Description of Business and Basis of Presentation | NOTE 1 – Description of Business and Basis of Presentation NeuroOne Medical Technologies Corporation (the “Company”), a Delaware Corporation, is an early-stage medical technology company focused on the development and commercialization of thin film electrode technology for continuous electroencephalogram (cEEG) and stereoelectroencephalography (sEEG) recording, brain stimulation and ablation solutions for patients suffering from epilepsy, Parkinson’s disease, dystonia, essential tremors and other related brain related disorders. Additionally, we are investigating the potential applications of our technology associated with artificial intelligence. To date, the Company has recorded no product sales and has a limited expense history. The Company is a development stage company and its activities to date have included raising capital to fund the development of its proprietary technology and seek regulatory clearances required to initiate commercial activities. The Company is based in Minnetonka, Minnesota. Basis of presentation The accompanying condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements may not include all disclosures required by U.S. GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the nine month transition period ended September 30, 2018 included in the Transition Report on Form 10-KT. The condensed consolidated balance sheet at September 30, 2018 was derived from the audited financial statements of the Company. In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. | NOTE 1 - Organization and Nature of Operations NeuroOne Medical Technologies Corporation (the “Company”), a Delaware Corporation, was originally incorporated as Original Source Entertainment, Inc. under the laws of the State of Nevada on August 20, 2009. Prior to the closing of the Acquisition (as defined below), the Company completed a series of steps contemplated by a Plan of Conversion pursuant to which the Company, among other things, changed its name to NeuroOne Medical Technologies Corporation, increased its authorized number of shares of common stock from 45,000,000 to 100,000,000, increased its authorized number of shares of preferred stock from 5,000,000 to 10,000,000 and reincorporated in Delaware. On July 20, 2017, the Company, through a wholly owned acquisition subsidiary, acquired 100% of the outstanding capital stock of NeuroOne, Inc. (“NeuroOne”) in a reverse triangular merger and reorganization pursuant to Section 368(a) of the Internal Revenue Code (the “Acquisition”). The Acquisition was accounted for as a capital transaction, or reverse recapitalization. NeuroOne was the accounting acquirer in this transaction. As such, the historical financial statements reflect the operations of NeuroOne for all periods presented prior to the date of Acquisition. NeuroOne was formed on October 7, 2016. The accompanying consolidated financial statements subsequent to the Acquisition include those of the Company, as well as those of its wholly owned subsidiary NeuroOne. Subsequent to the Acquisition, the Company’s operating activities became the same as those of NeuroOne, an early-stage medical technology company developing comprehensive neuromodulation cEEG and sEEG monitoring, ablation, and brain stimulation solutions to diagnose and treat patients with epilepsy, Parkinson’s disease, essential tremors, and other brain related disorders. To date, the Company has recorded no product sales and has a limited expense history. The Company is currently raising capital to fund the development of its proprietary technology and is seeking regulatory clearances required to initiate commercial activities. The Company is based in Minnetonka, Minnesota effective December 1, 2018. The Company was previously based in Eden Prairie, Minnesota. Acquisition of NeuroOne, Inc. The Acquisition was consummated on July 20, 2017 (the “Closing”) and, pursuant to the terms of the merger agreement, (i) all outstanding shares of common stock of NeuroOne, par value $0.0001 per share (the “NeuroOne Shares”), were exchanged for shares of the Company’s common stock, par value $0.001 per share (the “Company Shares”), based on the exchange ratio of 17.0103706 Company Shares for every one NeuroOne Share (the “Exchange Ratio”), resulting in the Company issuing, on July 20, 2017, an aggregate of 6,291,994 Company Shares for all of the then-outstanding NeuroOne Shares, (ii) all outstanding options of NeuroOne were replaced with options to purchase Company Shares based on the Exchange Ratio, with corresponding adjustments to their respective exercise prices, pursuant to which the Company reserved 992,265 Company Shares for issuance upon the exercise of options, (iii) all warrants of NeuroOne were replaced with warrants to purchase Company Shares and (iv) the Company assumed the outstanding convertible promissory notes of NeuroOne. NeuroOne options had been issued pursuant to the NeuroOne 2016 Equity Incentive Plan. Pursuant to the merger agreement, the Company assumed the NeuroOne 2016 Equity Incentive Plan upon the Closing. Pursuant to the Acquisition, the Company acquired 100% of NeuroOne Shares in exchange for the issuance of Company Shares and NeuroOne became the Company’s wholly-owned subsidiary. Also at the Closing, Mr. Samad (the majority owner of the Company prior to the Acquisition) tendered for cancellation 3,500,000 Company Shares held by him as part of the conditions to Closing. All issued and outstanding common stock share amounts, options for common stock and per share amounts contained in the consolidated financial statements were retroactively adjusted to reflect the Exchange Ratio for all periods presented. |
Going Concern
Going Concern | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Going Concern [Abstract] | ||
Going Concern | NOTE 2 – Going Concern The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred losses since inception and had an accumulated deficit of $11,810,534 as of December 31, 2018. The Company does not have adequate liquidity to fund its operations throughout fiscal 2019 without raising additional funds. These factors raise substantial doubt about its ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this condition. Management intends to continue to seek additional financing to fund operations. If the Company is not able to raise additional working capital, it will have a material adverse effect on the operations of the Company and the development of its technology. Through December 31, 2018, the Company has completed a $528,000 unsecured loan financing, a $253,000 short-term promissory note financing (which notes were amended and restated to become convertible promissory notes), a $1,625,120 convertible promissory note financing of a planned $2.5 million subscription and a second $1,540,000 convertible promissory note financing of a planned $2 million subscription. In addition, the Company entered into a private placement transaction of its common stock beginning in July 2018, and as replaced in December 2018, whereby $1.9 million in gross proceeds were raised out of a planned $11.8 million maximum under the subscription amounts through December 31, 2018. See Note 13 – Subsequent Events for financings that have closed after December 31, 2018. The Company does not have adequate liquidity to fund its operations throughout fiscal 2019 without raising additional funds. Management intends to continue to seek additional debt and/or equity financing to fund operations. However, if the Company is unable to raise additional funds, or the Company’s anticipated operating results are not achieved, management believes planned expenditures may need to be reduced in order to extend the time period that existing resources can fund the Company’s operations. If management is unable to obtain the necessary capital, it may have to cease operations. | NOTE 2 - Going Concern The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred losses and negative cash flows from operations since inception and had an accumulated deficit of $10,457,710 as of September 30, 2018. In the event the Company is unable to complete an equity round of financing resulting in more than $3 million in gross proceeds by December 31, 2018, the 2017 Convertible Notes and accrued interest thereon will become due. The Company does not have adequate liquidity to fund the repayment of the 2017 Convertible Notes if they become due on December 31, 2018 or to fund its operations throughout fiscal 2019 without raising additional funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this condition. If the Company is not able to raise additional working capital, it will have a material adverse effect on the operations of the Company and the development of its technology. Through September 30, 2018, since inception, the Company has completed unsecured loan financings for gross proceeds of $283,000, a $253,000 short-term promissory note financing (which notes were amended and restated to become convertible promissory notes as described below), a $1,625,120 convertible promissory note financing and a second $1,540,000 convertible note promissory financing. In addition, the Company entered into a private placement transaction in July 2018 whereby $1,113,000 in gross proceeds were raised out of a planned $10.0 million maximum subscription amount (assuming the over-allotment option is not exercised) through September 30, 2018. The Company does not have adequate liquidity to fund its operations throughout fiscal 2019 without raising additional funds. Management intends to seek additional debt and/or equity financing to fund operations. However, if the Company is unable to raise additional funds, or the Company’s anticipated operating results are not achieved, management believes planned expenditures may need to be reduced in order to extend the time period that existing resources can fund the Company’s operations. If management is unable to obtain the necessary capital, it may have to cease operations. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | NOTE 3 – Summary of Significant Accounting Policies Management’s Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company’s cash is held by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of December 31, 2018, the Company did have deposits in excess of federally insured amounts by $134,109. Common Stock Valuation Due to the limited market liquidity for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. The valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, and the likelihood of achieving a liquidity event, such as an offering or sale. Significant changes to the key assumptions used in the valuations may result in different fair values of common stock at each valuation date. The Company estimated its enterprise value on a continuing operations basis, using the market approach, with certain adjustments relating to the thinly traded status of the Company. The traded price of the Company was deemed not to be an entirely reliable indication of fair market value given the lack of trading liquidity. Therefore, in addition to applying partial weighting to the traded price, the Company relied on forward revenue multiples from guideline public companies (“GPC”) for calendar year 2019 and 2020. The resulting equity value from the GPC method was allocated to common stock using the option pricing method, and a discount for lack of marketability was applied. Based on the above methodology and weightings, the Company derived a valuation conclusion of $2.20 and $2.30 per common share as of December 31, 2018 and September 30, 2018, respectively. The fair value the Company’s common stock is used as an input into the fair value determination of the warrants, stock option or other equity awards that the Company has issued or are outstanding liabilities at the reporting date. Fair Value of Financial Instruments The Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of December 31, 2018 and September 30, 2018, the fair values of cash, other assets, accounts payable, accrued expenses and the unsecured loans approximated their carrying values because of the short-term nature of these assets or liabilities. The estimated fair value of the convertible promissory notes of the Company was based on amortized cost which was deemed to approximate fair value. The fair value of the warrant liability and the premium conversion derivatives associated with the convertible promissory notes of the Company were based on both the estimated fair value of our common stock of $2.20 and $2.30 as of December 31, 2018 and September 30, 2018, respectively, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs. There were no transfers between fair value hierarchy levels during the three months ended December 31, 2018 and 2017. The fair value of financial instruments measured on a recurring basis is as follows: As of December 31, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 823,844 $ — $ — $ 823,844 Premium conversion derivatives 314,660 — — 314,660 Total liabilities at fair value $ 1,138,504 $ — $ — $ 1,138,504 As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 The following table provides a roll-forward of the warrant liability and premium debt conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the three month periods ended December 31, 2018 and 2017: 2018 2017 Warrant liability Balance as of beginning of period – September 30 $ 817,155 $ 774,172 Value assigned to warrants in connection with convertible promissory notes — 336,571 Change in fair value of warrant liability 6,689 270,722 Balance as of end of period – December 31 $ 823,844 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period – September 30 $ 308,395 $ 441,823 Value assigned to the underlying derivatives in connection with convertible promissory notes — 128,525 Change in fair value of premium debt conversion derivatives 6,265 (108,174 ) Balance as of end of period – December 31 $ 314,660 $ 462,174 Intellectual Property The Company has entered into two licensing agreements with major research institutions, which allows for access to certain patented technology and know-how. Payments under those agreements are capitalized and amortized to general and administrative expense over the expected useful life of the acquired technology. Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consists entirely of licensed intellectual property for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Through December 31, 2018, the Company has not impaired any long-lived assets. Debt Issuance Costs Debt issuance costs are recorded as a reduction of the convertible promissory notes when applicable. Amortization of debt issuance costs is calculated using the straight-line method over the term of the convertible promissory notes, which approximates the effective interest method, and is recorded in interest expense in the accompanying condensed consolidated statements of operations. Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses may include costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials as well as other contracted services, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with ASC 730, Research and Development Warrant Liability The Company issued warrants to purchase equity securities in connection with the issuance or amendment of the convertible promissory notes. The Company accounts for these warrants as a liability at fair value when the number of shares is not fixed and determinable in cases where warrant pricing protections in future equity financings are not available to other common stockholders. Additionally, issuance costs associated with the warrant liability are expensed as incurred and reflected as interest expense in the accompanying condensed consolidated statements of operations. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants for any period when pricing protections in future equity financings remain in place, or until such time, if any, as the number of shares to be exercised becomes fixed, at which point the warrants will be classified in stockholders’ (deficit) equity provided that there are sufficient authorized and unissued shares of common stock to settle the warrants and redeem any other contracts that may require settlement in shares of common stock. Any future change in fair value of the warrant liability, when outstanding, is recognized in the condensed consolidated statements of operations. Premium Debt Conversion Derivatives The Company evaluates all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivative is accounted for separately on a fair market value basis. The Company records the fair value changes of a separated embedded derivative at each reporting period in the condensed consolidated statements of operations. The Company determined that the redemption features under the convertible promissory notes qualified as embedded derivatives and were separated from their debt hosts. Income Taxes For the Company, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Net Loss Per Share For the Company, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s convertible promissory notes, warrants, and stock options while outstanding are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants and stock options. Diluted earnings with respect to the convertible promissory notes utilizing the if-converted method was not applicable during the three month periods ended December 31, 2018 and 2017 as no conditions required for conversion had occurred during these periods. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the three month periods ended December 31, 2018 and 2017. The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three month periods ended December 31, 2018 and 2017: 2018 2017 Warrants 3,257,572 (1) 189,750 (1) Stock options 543,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million or a change of control transaction occurs in the future. Recent Accounting Pronouncements In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , Revenue from Contracts with Customers . In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ● Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ● Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. ● Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of the new guidance on its financial statements. | NOTE 3 - Summary of Significant Accounting Policies Basis of Presentation and Change in Fiscal Year The accompanying consolidated financial statements have been prepared in accordance with accounting standards generally accepted in the United States of America, In September 2018, the Board of Directors of the Company, pursuant to the bylaws and based upon the recommendation of its Audit Committee, approved a change in the Company’s fiscal year end from December 31 to September 30. The Company’s fiscal year now begins on October 1 and ends on September 30 of each year, starting on October 1, 2018. The required transition period of January 1, 2018 to September 30, 2018 is included in the consolidated financial statements. For comparative purposes, the unaudited consolidated statements of operations and consolidated statements of cash flows for the nine months ended September 30, 2017 are also presented. Management’s Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company’s cash is held by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of September 30, 2018, the Company did not have any deposits in excess of federally insured amounts. Common Stock Valuation Due to the limited market liquidity for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (the “Practice Aid”), to estimate the fair value of its common stock. The valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, and the likelihood of achieving a liquidity event, such as an offering or sale. Significant changes to the key assumptions used in the valuations may result in different fair values of common stock at each valuation date. Following is a summary of underlying assumptions used: Prior to the Acquisition Prior to the Acquisition on July 20, 2017, NeuroOne was a private company with no active public market for its common stock. Therefore, at the time, NeuroOne determined the fair value of its common stock using a contemporaneous valuation performed in accordance with the Practice Aid. Within this contemporaneous valuation performed by NeuroOne included the following significant factors: ● recent securities transactions; ● stage of development and business strategy; ● the likelihood of a liquidity event such as an initial public offering, a merger or the sale of our company; ● financial condition and operating results, including our projected results; and ● financial condition and operating results of comparable publicly owned companies The fair value of NeuroOne’s common stock prior to the Acquisition was determined during a period when there was limited data with regard to value indication other than convertible notes issued between November 2016 and June 2017. At the time, such convertible notes contained a $1.80 conversion cap, which was treated as an estimated price of preferred stock into which the notes would convert. A transaction backsolve was performed that equated the $1.5 million investment in the convertible notes with the resulting equity allocation to the hypothetical converted shares and warrants expected to be issued upon conversion. The resulting equity value was then used to infer the value of common stock within the same option-pricing framework. This scenario implicitly assumed 100% likelihood of a stock financing. In order to account for the possibility of dissolution, the transaction backsolve was used along with a dissolution scenario within a hybrid Probability Weighted Expected Return Method (“PWERM”). The scenarios were weighted 50/50, and a Discount For Lack of Marketability (“DLOM”) applied, to determine the valuation conclusion. Following the Acquisition For valuations following the Acquisition, including the valuation of common stock on December 31, 2017, the Company estimated our enterprise value on a continuing operations basis, using the market approach, with certain adjustments relating to the thinly traded status of the Company. The traded price of the Company was deemed not to be an entirely reliable indication of fair market value given the lack of trading liquidity. Therefore, in addition to applying partial weighting to the traded price, the Company relied on forward revenue multiples from guideline public companies (“GPC”) for calendar year 2019 and 2020. The resulting equity value from the GPC method was allocated to common stock using the option pricing method, and a DLOM was applied. Based on the above methodology and weightings, the Company derived a valuation conclusion of $2.30 and $2.52 per share as of September 30, 2018 and December 31, 2017, respectively. The significant factors contributing to the increase in the fair value the Company’s common stock following the Acquisition included the following: ● The successful completion of the reverse merger; ● Access to new capital as a public company; ● Improved revenue projections; ● Improved general economic conditions; ● Additional issuance of convertible notes; and ● Important developments relating to achievement of our business objectives The fair value the Company’s common stock is used as an input into the fair value determination of the warrants, stock option or other equity awards that the Company has issued or are outstanding liabilities at the reporting date. Fair Value of Financial Instruments The Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. As of September 30, 2018 and December 31, 2017, the fair values of cash, accounts payable, accrued expenses and the unsecured loans approximated their carrying values because of the short-term nature of these assets or liabilities. The estimated fair value of the short-term and convertible promissory notes of the Company was based on amortized cost which was deemed to approximate fair value. The fair value of the warrant liability and the premium conversion derivatives associated with the convertible promissory notes of the Company were based on both the estimated fair value of our common stock of $2.30 and $2.52 as of September 30, 2018 and December 31, 2017, respectively, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs. There were no transfers between fair value hierarchy levels during the nine month transition period ended September 30, 2018 or for the year ended December 31, 2017. The fair value of financial instruments measured on a recurring basis is as follows: As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 As of December 31, 2017 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 1,381,465 $ — $ — $ 1,381,465 Premium conversion derivatives 462,174 — — 462,174 Total liabilities at fair value $ 1,843,639 $ — $ — $ 1,843,639 The following table provides a roll-forward of the warrant liability and premium debt conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017: 2018 2017 Warrant liability Balance as of beginning of period $ 1,381,465 $ 345,960 Value assigned to warrants in connection with convertible promissory and short-term notes 579,873 777,490 Reclassification to equity (1,179,418 ) — Change in fair value of warrant liability 35,235 258,015 Balance as of end of period $ 817,155 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period $ 462,174 $ 137,650 Value assigned to the underlying derivatives in connection with convertible promissory and short-term notes 218,052 342,486 Change in fair value of premium debt conversion derivatives (371,831 ) (17,962 ) Balance as of end of period $ 308,395 $ 462,174 Intellectual Property The Company has entered into two licensing agreements with major research institutions, which allows for access to certain patented technology and know-how. Payments under those agreements are capitalized and amortized to general and administrative expense over the expected useful life of the acquired technology. Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consists entirely of licensed intellectual property for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Through September 30, 2018, no milestones triggering possible impairment of the Company’s long-lived assets have occurred. Debt Issuance Costs Debt issuance costs are recorded as a reduction of the convertible promissory notes and short-term notes when applicable. Amortization of debt issuance costs is calculated using the straight-line method over the term of the convertible promissory notes, which approximates the effective interest method, and is recorded in interest expense in the accompanying consolidated statements of operations. Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses may comprise of costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials as well as other contracted services, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with ASC 730, Research and Development Warrant Liability The Company issued warrants to purchase equity securities in connection with the issuance of convertible promissory notes (See Note 7– Short-Term Promissory Notes and Unsecured Loans and Note 8 – Convertible Promissory Notes and Warrant Agreements). The Company accounts for these warrants as a liability at fair value when the number of shares is not fixed and determinable in cases where warrant pricing protections in future equity financings are not available to other common stockholders. Additionally, issuance costs associated with the warrant liability are expensed as incurred and reflected as interest expense in the accompanying consolidated statements of operations. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants for any period when pricing protections in future equity financings remain in place, or until such time, if any, as the number of shares to be exercised becomes fixed, at which point the warrants will be classified in stockholders’ (deficit) equity provided that there are sufficient authorized and unissued shares of common stock to settle the warrants and redeem any other contracts that may require settlement in shares of common stock. Any future change in fair value of the warrant liability, when outstanding, is recognized in the consolidated statements of operations. Premium Debt Conversion Derivatives The Company evaluates all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivatives are accounted for separately on a fair value basis. The Company records the fair value changes of separated embedded derivatives at each reporting period in the consolidated statements of operations (See Note 7– Short-Term Promissory Notes and Unsecured Loans and Note 8 – Convertible Promissory Notes and Warrant Agreements). The Company determined that the redemption features under the convertible promissory notes qualified as embedded derivatives and therefore separated from the debt host with regard to the convertible promissory notes. Income Taxes For the Company, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion of all of the deferred tax asset will not be realized. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law making significant changes to the U.S. tax code. Changes affecting the Company’s consolidated financial statements include, but are not limited to, a U.S federal corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. The Company has adjusted the disclosure amounts related to deferred tax assets and the valuation allowance recorded to reflect the new federal corporate tax rates. Net Loss Per Share For the Company, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s convertible promissory notes, warrants and stock options are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants and stock options. Diluted earnings with respect to the convertible promissory notes utilizing the if-converted method was not applicable during the nine month transition period ended September 30, 2018 or for the year ended December 31, 2017 as no conditions required for conversion had occurred during these periods. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017. The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017: 2018 2017 Warrants 2,927,572 (1) 189,750 (1) Stock options 368,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million occurs in the future related to the 2017 Convertible Notes. Recent Accounting Pronouncements In May 2017, the FASB issued Accounting Standards Update (ASU) 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2016-09) In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , Revenue from Contracts with Customers . In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ● Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ● Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. ● Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of the new guidance on its financial statements. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitments and Contingencies | NOTE 4 – Commitments and Contingencies Legal From time to time, the Company is subject to litigation and claims arising in the ordinary course of business. In May 2017, NeuroOne received a letter from PMT Corporation ("PMT"), the former employer of Mark Christianson and Wade Fredrickson. PMT claimed that these officers had breached their restrictive covenant obligations with PMT by virtue of their work for NeuroOne and such officer's prior work during employment with the prior employer, that these officers had breached their confidentiality and non-disclosure obligations to PMT and federal and state law by misappropriating confidential and trade secret information, and that the Company is responsible for tortious interference with the contracts. The letter demanded that Mr. Fredrickson (who resigned from the Company in June 2017), Mr. Christianson and NeuroOne cease and desist all competitive activities, that Mr. Fredrickson step down from his position and that Mr. Christianson and NeuroOne provide the former employer access to NeuroOne's systems to demonstrate that it is not using trade secrets or proprietary information nor competing with the former employer. On March 29, 2018, the Company was served with a complaint filed by PMT adding the Company, NeuroOne and Mr. Christianson to its existing lawsuit against Mr. Fredrickson. In the lawsuit, PMT claims that Mr. Fredrickson and Mr. Christianson breached their non-competition, non-solicitation and non-disclosure obligations, breached their fiduciary duty obligations, were unjustly enriched, engaged in unfair competition, engaged in a civil conspiracy, tortiously interfered with PMT's contracts and prospective economic advantage, and breached a covenant of good faith and fair dealing. Against Mr. Fredrickson, PMT also alleges that he intentionally or negligently spoliated evidence, made negligent or fraudulent misrepresentations, misappropriated trade secrets in violation of Minnesota law, and committed the tort of conversion and statutory civil theft. Against the Company and NeuroOne, PMT alleges that the Company and NeuroOne were unjustly enriched and engaged in unfair competition. PMT asked the Court to impose a constructive trust over the shares held by Mr. Fredrickson and Mr. Christianson and to award compensatory damages, equitable relief, punitive damages, attorneys' fees, costs and interest. On April 18, 2018, Mr. Christianson, the Company and NeuroOne, Inc. filed a motion for dismissal, which was heard by the Court on October 11, 2018. The motion for dismissal states that: the contract claims against Mr. Christianson fail because his agreement was not supported by consideration; the Minnesota Uniform Trade Secrets Act preempts plaintiff's claims for unfair competition, civil conspiracy and unjust enrichment; plaintiff fails to state a claim regarding alleged breach of the duties of loyalty and good faith/fair dealing; plaintiff cannot legally obtain a constructive trust; plaintiff has insufficiently pled its tortious interference claims; and Plaintiff has not stated a claim for unfair competition. On January 7, 2019, the judge granted the motion for dismissal with respect to PMT's claim for breach of the duty of good faith and fair dealing, and denied the motion for dismissal with respect to the other claims presented. The Company, NeuroOne, Inc. and Mr. Christianson (who has not worked for PMT since February 2012) intend to continue to defend themselves vigorously. The outcome and potential loss related to this matter is unknown and no reserve has been accrued for as of December 31, 2018 and as of the issuance of these condensed consolidated financial statements. | NOTE 4 - Commitments and Contingencies WARF License Agreement On October 1, 2014, NeuroOne LLC (the “LLC”), NeuroOne’s predecessor which was merged with and into NeuroOne on October 27, 2016 (the “Merger”), entered into an exclusive start-up company license agreement with the Wisconsin Alumni Research Foundation (“WARF”) for WARF’s neural probe array and thin film micro electrode technology (the “2014 WARF Agreement”). The license agreement required the LLC to make $110,000 in milestone payments depending on achievement of certain development and approval milestones or within twelve months of signing the 2014 WARF Agreement. Additionally, if the LLC was successful in obtaining regulatory approval, the LLC was to pay royalties to WARF on a percentage of net sales of products of the licensed technology. Under the terms of the 2014 WARF Agreement, amounts that remained unpaid more than 30 days after they were due, accrued interest at 1 percent per month. Milestone payments due in 2015 were not made to WARF. From October 27, 2016 until the 2014 WARF Agreement was amended as described below, the LLC was in default under the 2014 WARF Agreement. In addition, the LLC was not able to transfer the rights and obligations under the 2014 WARF Agreement to NeuroOne at the time of the Merger without the consent of WARF, which was received when the 2014 WARF Agreement was amended in February 2017 as described below. In connection with the Merger and in accordance with ASC 805-50, NeuroOne estimated the fair value of consideration payable to WARF and recorded an intangible asset of $120,000 with a corresponding accrued expense. This agreement was subsequently amended in February 2017 (as so amended, the “2017 WARF Agreement”) whereby WARF consented to the transfer of the rights and obligations under the license agreement from the LLC to NeuroOne (which are now the Company’s rights and obligations, following the Acquisition). In the 2017 WARF Agreement, the Company agreed to pay WARF $55,000 (representing a license fee) upon the earliest to occur of the date the Company cumulatively raises at least $3 million in financing, the date of a change of control, or the Company’s revenue reaching a specified threshold amount. The Company met the milestone payment requirement with regard to the $55,000 license fee which was paid in April 2018. In addition, the Company agreed to pay $65,000 (representing reimbursement for costs incurred by WARF in maintaining the licensed patents) upon the earliest to occur of the date the Company cumulatively raises at least $5 million in financing, the date of a change of control, or the Company’s revenue reaching a specified threshold amount. As of September 30, 2018, the Company has not met the requirements for the $65,000 milestone payment and this amount remains in accrued expenses. The Company is also obligated to pay royalties to WARF based on a percentage of net sales of products of licensed technology with minimum royalties of $50,000 and $100,000 for calendar years 2019 and 2020, respectively, and $150,000 per year beginning in 2021 through the duration of the 2017 WARF Agreement. Subject to earlier termination, the WARF License otherwise expires by its terms on the date that no valid claims on the patents licensed thereunder remain. The Company expects the latest expiration of a licensed patent to occur in 2030. The 2017 WARF Agreement is also subject to certain cancellation provisions with 90 days’ notice should the Company elect not to continue to use the licensed technology. The Company has agreed to diligently develop, manufacture, market and sell products under the WARF License in the United States during the term of the agreement and, specifically, that the Company would submit a business plan to WARF by February 1, 2018, which the Company submitted on January 18, 2018, and file an application for 510(k) marketing clearance with the FDA by February 1, 2019. WARF may terminate the 2017 WARF Agreement in the event that the Company fails to meet these milestones on 30 days’ written notice, if the Company defaults on the payments of amounts due to WARF or fails to timely submit development reports, actively pursue the development plan or breaches any other covenant in the 2017 WARF Agreement and fails to remedy such default in 90 days or in the event of certain bankruptcy events involving the Company. WARF may also terminate this license (i) on 90 days’ notice if the Company fails to have commercial sales of one or more FDA-approved products under the 2017 WARF Agreement by March 31, 2019 or (ii) if, after royalties earned on sales begin to be paid, such earned royalties cease for more than four calendar quarters. Mayo Agreement On October 3, 2014, the LLC entered into an exclusive license and development agreement with the Mayo Foundation for Medical Education and Research (“Mayo”) related to certain intellectual property and development services for thin film micro electrode technology (“2014 Mayo Agreement”). The LLC was to make milestone payments depending on achievement of certain development and approval milestones and sales targets, none of which were met as of December 31, 2015. Additionally, if the LLC was successful in obtaining regulatory approval, the LLC was to pay royalties to Mayo based on a percentage of net sales of products of the licensed technology through the term of the 2014 Mayo Agreement, set to expire May 25, 2037. Also, the LLC was obligated to issue common stock to Mayo if certain events occurred. Upon the LLC’s merger with NeuroOne on October 27, 2016, the rights under the 2014 Mayo Agreement transferred to NeuroOne, and certain milestones were attained. Therefore, NeuroOne recorded liabilities of $300 related to shares of common stock expected to be issued to Mayo and $91,709 for the intellectual property to be paid in cash. Under the terms of the 2014 Mayo Agreement, amounts that remained unpaid accrued interest at 2 percent above the prime rate. Milestone payments due in 2016 were not made to Mayo. As such, prior to the amendment of the 2014 Mayo Agreement in May 2017, NeuroOne was in default under the 2014 Mayo Agreement. Mayo and NeuroOne amended and restated the 2014 Mayo Agreement in May 2017 (as so amended and restated, the “2017 Mayo Agreement”). Pursuant to the 2017 Mayo Agreement, NeuroOne issued 859,976 shares of common stock (as converted based on the Exchange Ratio) to Mayo to settle the amount of common stock NeuroOne was previously obligated to issue under the 2014 Mayo Agreement and as provided by the terms of the 2017 Mayo Agreement. NeuroOne recorded an additional $23,115 to intangible assets related to the fair value of the 2017 stock issuance to Mayo. As a part of the 2017 Mayo Agreement, as amended in November 2017, the $91,709 milestone payment was paid in December 2017. Legal From time to time, the Company is subject to litigation and claims arising in the ordinary course of business. In May 2017, NeuroOne received a letter from PMT, the former employer of Mark Christianson and Wade Fredrickson. PMT claimed that these officers had breached their restrictive covenant obligations with PMT by virtue of their work for NeuroOne and such officer’s prior work during employment with the prior employer, that these officers had breached their confidentiality and non-disclosure obligations to PMT and federal and state law by misappropriating confidential and trade secret information, and that the Company is responsible for tortious interference with the contracts. The letter demanded that Mr. Fredrickson (who resigned from the Company in June 2017), Mr. Christianson and NeuroOne cease and desist all competitive activities, that Mr. Fredrickson step down from his position and that Mr. Christianson and NeuroOne provide the former employer access to NeuroOne’s systems to demonstrate that it is not using trade secrets or proprietary information nor competing with the former employer. On March 29, 2018, the Company was served with a complaint filed by PMT adding the Company, NeuroOne and Mr. Christianson to its existing lawsuit against Mr. Fredrickson. In the lawsuit, PMT claims that Mr. Fredrickson and Mr. Christianson breached their non-competition, non-solicitation and non-disclosure obligations, breached their fiduciary duty obligations, were unjustly enriched, engaged in unfair competition, engaged in a civil conspiracy, tortiously interfered with PMT’s contracts and prospective economic advantage, and breached a covenant of good faith and fair dealing. Against Mr. Fredrickson, PMT also alleges that he intentionally or negligently spoliated evidence, made negligent or fraudulent misrepresentations, misappropriated trade secrets in violation of Minnesota law, and committed the tort of conversion and statutory civil theft. Against the Company and NeuroOne, PMT alleges that the Company and NeuroOne were unjustly enriched and engaged in unfair competition. PMT asked the Court to impose a constructive trust over the shares held by Mr. Fredrickson and Mr. Christianson and to award compensatory damages, equitable relief, punitive damages, attorneys’ fees, costs and interest. The Company, NeuroOne and Mr. Christianson (who has not worked for PMT since 2012) intend to defend themselves vigorously. On April 18, 2018, Mr. Christianson, the Company and NeuroOne, Inc. filed a motion for dismissal, which was heard by the Court on October 11, 2018. The Company expects a ruling on the motion within 90 days of that date. The motion for dismissal states that: the contract claims against Mr. Christianson fail because his agreement was not supported by consideration; the Minnesota Uniform Trade Secrets Act preempts plaintiff’s claims for unfair competition, civil conspiracy and unjust enrichment; plaintiff fails to state a claim regarding alleged breach of the duties of loyalty and good faith/fair dealing; plaintiff cannot legally obtain a constructive trust; plaintiff has insufficiently pled its tortious interference claims; and Plaintiff has not stated a claim for unfair competition. The outcome and potential loss related to this matter is unknown as of September 30, 2018 and as of the issuance of these financial statements. |
Intangibles
Intangibles | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangibles | NOTE 5 – Intangibles Intangible assets consisted of the following at December 31, 2018: Useful Life Net Intangibles, September 30, 2018 12-13 Years $ 200,081 Less: amortization (5,311 ) Net Intangibles, December 31, 2018 $ 194,770 Amortization expense was $5,311 and $4,265 for the three months ended December 31, 2018 and 2017, respectively. | NOTE 5 - Intangibles Intangible assets rollforward is as follows: Useful Life Net Intangibles, December 31, 2016 12-13 years $ 180,890 License agreement amendment 53,115 Less: amortization (17,633 ) Net Intangibles, December 31, 2017 216,372 Less: amortization (16,291 ) Net Intangibles, September 30, 2018 $ 200,081 The Company anticipates amortization expense of approximately $21,000 per year for fiscal year 2019 through 2023 based upon the two current license agreements. |
Accrued Expenses
Accrued Expenses | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Payables and Accruals [Abstract] | ||
Accrued Expenses | NOTE 6 – Accrued Expenses Accrued expenses consisted of the following at December 31, 2018 and September 30, 2018: December 31, 2018 September 30, 2018 License fees $ 65,000 $ 65,000 Legal services 848,708 833,470 Accrued issuance costs 229,201 204,000 Accrued payroll 316,350 276,639 Advances 40,000 — Other 241,634 211,913 $ 1,740,893 $ 1,591,022 | NOTE 6 - Accrued Expenses Accrued expenses consisted of the following at September 30, 2018 and December 31, 2017: 2018 2017 Accrued license fees $ 65,000 $ 120,000 Legal costs 833,470 553,037 Accrued issuance costs 204,000 28,083 Accrued payroll 276,639 223,195 Advances — 50,000 Other 211,913 47,302 $ 1,591,022 $ 1,021,617 |
Short-Term Promissory Notes and
Short-Term Promissory Notes and Unsecured Loan | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Debt Disclosure [Abstract] | ||
Short-Term Promissory Notes and Unsecured Loans | NOTE 7 – Short-Term Promissory Notes and Unsecured Loan Short-Term Promissory Notes The Company issued short-term unsecured and interest-free promissory notes (the “Short-Term Notes”) for aggregate gross proceeds of $253,000 in August 2017 which included free standing equity warrants. The Short-Term Notes were subsequently amended in November 2017 to extend the maturity date and increase the number of shares of Common Stock issuable upon exercise of the related warrants. The Short-Term Notes were also amended in March 2018 to become convertible, include new interest payment provisions and new conversion features and to provide for the issuance of a replacement warrant (the “Replacement Warrant”) and an additional warrant (the “Additional Warrant”) described more fully below. Effective July 2, 2018, the Company entered into debt conversion agreements with each Short-Term Note subscriber to (i) convert the outstanding principal and accrued and unpaid interest (the “Outstanding Balance”) under the Short-Term Notes into shares of the Company’s common stock based on the Outstanding Balance divided by $1.80 per share (the “Short-Term Note Conversion Shares”); (ii) cancel and extinguish the Short-Term Notes; and (iii) amend and restate the Replacement Warrants and Additional Warrants, as described more fully below, to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Short-Term Notes, the Company issued each subscriber a new warrant (the “Short-Term Note Payment Warrants”), exercisable for up to the number of shares of common stock equal to the number of Short-Term Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. The Short-Term Note Payment Warrants became exercisable commencing on July 2, 2018, and expire on November 21, 2021. The November 2017 amendment resulted in a substantial modification to the original Short-Term Notes whereby additional warrant coverage was added and the maturity date of the Short-Term Notes was extended. The Company recorded the November 2017 Short-Term Note amendment under the provisions of extinguishment accounting. A loss on note extinguishments in the accompanying condensed consolidated statements of operations for the three months ended December 31, 2017 was recorded in the amount of $144,577, which represented the difference between the face value of the Short-Term Notes over the combined carrying values of the Short-Term Notes and warrants on the date of the amendment. The fair value increase of the Short-Term Notes and the warrants as amended over its adjusted carrying value at the time of the amendment was $117,280 which was recorded as additional paid-in capital. During the three months ended December 31, 2017, interest related to amortization of discounts associated with the separation of the equity warrants and issuance costs amounted to $21,627. As noted above, the Short-Term Notes were converted into shares of common stock and were not outstanding during the three month period ended December 31, 2018. Unsecured Loans In December 2018, the Company received gross proceeds from an unsecured loan represented by one promissory note in the amount of $100,000 from a stockholder owning over 5% of the Company’s common stock. The loan is interest free and requires that the Company repay the principal in full on the earlier of the closing of an equity round of financing of the Company resulting in more than $5 million in gross proceeds or December 12, 2019. In November 2018, the Company received cash gross proceeds from unsecured loans represented by two promissory notes in the amounts of $45,000 and $100,000 from a stockholder owning or a stockholder affiliated with stockholders owning over 5% of the Company’s common stock. The loans are interest free and require that the Company repay the principal in full on the earlier of the closing of an equity round of financing of the Company resulting in more than $5 million in gross proceeds or November 14, 2019. On May 17, 2018, the Company received cash proceeds of $168,000 from unsecured loans, represented by two promissory notes from a stockholder owning or a stockholder affiliated with stockholders owning over 5% of the Company’s common stock. The loans are interest free and require that the Company repay the principal in full on the earlier to occur of (i) May 17, 2019 or (ii) the closing of an equity round of financing of the Company that raises more than $5 million in gross proceeds. The loans include customary events of default provisions. On March 20, 2018, the Company received cash proceeds from an unsecured loan, represented by a promissory note, for $115,000 from a stockholder owning over 5% of the Company’s common stock. The loan is interest free and requires that the Company repay the principal in full on the earlier to occur of (i) March 20, 2019 or (ii) the closing of an equity round of financing of the Company that raises more than $3 million in gross proceeds. The loan includes customary events of default provisions. | NOTE 7 - Short-Term Promissory Notes and Unsecured Loans As of As of Short-term promissory notes $ — $ 253,000 Unsecured loans $ 283,000 $ — Short-Term Promissory Notes The Company issued short-term unsecured and interest-free promissory notes (the “Short-Term Notes”) for aggregate gross proceeds of $253,000 in August 2017 which included free standing equity warrants. The Short-Term Notes were subsequently amended in November 2017 and March 2018 to become convertible, extend the maturity date and include additional warrant coverage, new interest payment provisions and new conversion features described more fully below. Effective July 2, 2018, the Company entered into debt conversion agreements (the “Short-Term Note Conversion Agreements”) with each Short-Term Note subscriber to (i) convert the outstanding principal and accrued and unpaid interest (the “Outstanding Balance”) under the Short-Term Notes into shares of the Company’s common stock based on the Outstanding Balance divided by $1.80 per share (the “Short-Term Note Conversion Shares”); (ii) cancel and extinguish the Short-Term Notes; and (iii) amend and restate the Replacement Warrants and Additional Warrants, as described more fully below, to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Short-Term Notes, the Company issued each subscriber a new warrant (the “Short-Term Note Payment Warrants”), exercisable for up to the number of shares of common stock equal to the number of Short-Term Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. The Short-Term Note Payment Warrants became exercisable commencing on July 2, 2018, and expire on November 21, 2021. Pursuant to the Short-Term Note Conversion Agreements, $259,297 of the outstanding principal and interest of the Short-Term Notes was converted into 144,053 shares of common stock with an additional 477,856 shares issuable upon exercise of the Replacement Warrants, Additional Warrants and Short-Term Payment Warrants. The conversion of the Short Term Notes was accounted for as an extinguishment. The difference in the carrying value of the Short-Term Notes coupled with the fair value of the underlying Replacement Warrants and Additional Warrants on the date of extinguishment relative to the higher fair value of the underlying common stock and collective Replacement Warrants, Additional Warrants and new Short-Term Payment Warrants issued was $148,787. The $148,787 differential was recorded as a loss on note extinguishments in the accompanying consolidated statements of operations during the nine month transition period ended September 30, 2018. The Replacement Warrants, Additional Warrants and Short-Term Note Payment Warrants were deemed to be free-standing equity instruments upon execution of the July 2, 2018 Short-Term Note Conversion Agreements. All of the warrant terms became fixed and have identical provisions. Due to the previously granted warrants now having fixed terms, the warrant liability value of $148,053 was reclassified to equity. The warrants associated with the Short-Term Notes became immediately exercisable on July 2, 2018 and expire November 21, 2021. The Black-Scholes model was used to determine the July 2, 2018 fair value of the warrants associated with the Short-Term Warrants. Input assumptions used were as follows: a risk-free interest rate of 2.65 percent; expected volatility of 49.8% percent; expected life of 3.39 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. Activity Prior to the July 2, 2018 Cancellation, Extinguishment and Conversion of the Short-Term Notes In August 2017, the Company’s Board of Directors (the “Board”) authorized, and the Company issued the Short-Term Notes for aggregate gross proceeds of $253,000 prior to issuance costs of $3,030 which were discounted from the Short-Term Notes and were amortized ratably to interest expense over the original term of the Short-Term Notes up though November 2017. For the year ended December 31, 2017, discount amortization charged to interest expense related to the issuance costs was $1,748 through the November 30, 2017 amendment date as discussed further below. On November 30, 2017, the Short-Term Notes were amended to extend the maturity date from February 18, 2018 to July 31, 2018 and to increase warrant coverage to 189,750 common stock purchase warrants (as amended, the “Original Warrants”). The Original Warrants had a term of 5 years and an exercise price of $1.80 and would have been immediately exercisable upon maturity of the Short-Term Notes prior to the November 30, 2017 amendment. The November 30, 2017 amendment resulted in a substantial modification to the Short-Term Notes and was accounted for under the provisions of extinguishment accounting. A loss on note extinguishments in the accompanying statements of operations for the year ended December 31, 2017 was recorded in the amount of $144,577, which represented the difference between the face value of the Short-Term Notes over the combined carrying values of the Short-Term Notes and warrants on the date of the amendment. The fair value increase of the Short-Term Notes and the warrants as amended over its adjusted carrying value at the time of the amendment was $117,280 which was recorded as additional paid-in capital. Prior to the November 30, 2017 amendment, the holders were to receive 126,500 common stock purchase warrants upon maturity. A portion of the proceeds from the Short-Term Notes upon issuance was allocated to the original warrants based on their relative fair value to the underlying Short-Term Notes in the amount of $61,496 and was recorded in additional paid-in capital in the accompanying consolidated balance sheets and was discounted from the Short-Term Notes and was being amortized to interest expense ratably over the term of the Short-Term Notes which amounted to $35,479 during the year ended December 31, 2017. The fair value of the warrants was based on the Black-Scholes method with the following assumptions: a risk-free interest rate of 2.1 percent; expected volatility of 47.8 percent; expected life of 5.7 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The Short-Term Notes were subsequently amended and restated on March 12, 2018 (the “Amended and Restated Short-Term Notes”). The Amended and Restated Short-Term Notes became convertible promissory notes that had interest assessed at a fixed rate of 8% per annum and would have required the Company to repay the principal and accrued and unpaid interest thereon on the maturity date of July 31, 2018 (the “Short-Term Note Maturity Date”). Pursuant to the terms of each Amended and Restated Short-Term Note and a consent signed by the Company and each holder, the Original Warrants under the Short-Term Notes were modified whereby each subscriber received a replacement warrant (the “Replacement Warrants”) upon the issuance of the Amended and Restated Short-Term Note, in lieu of the Original Warrant. In addition, each holder was issued an additional warrant (the “Additional Warrants”). Replacement Warrants Each Replacement Warrant issued on March 12, 2018 granted the holder the option to purchase up to the number of shares of capital stock of the Company equal to the New Round Stock issued or issuable upon the conversion of the Amended and Restated Short-Term Note held by such holder at a per share exercise price equal to either (i) the actual per share price of New Round Stock if the Amended and Restated Short-Term Notes converted in connection with a Short-Term Note Qualified Financing or (ii) the price at which the Amended and Restated Short-Term Notes converted in connection with a change of control transaction. The Replacement Warrants were exercisable commencing on the Conversion Date and would have expired on November 21, 2021. The exercise price and number of the shares issuable upon exercising the Replacement Warrants were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described therein. The Replacement Warrants were deemed to be free-standing instruments and were accounted for as a liability given the variable number of shares issuable in connection with a possible change of control conversion event. The Company recorded an initial liability of $137,722 upon issuance with an offset to extinguishment loss described further below. The fair value changes of the warrant liability associated with the Amended and Restated Short-Term Notes were recorded at each reporting date in the consolidated statements of operations which amounted to an expense of $10,330 for the nine month transition period ended September 30, 2018. A Monte Carlo simulation model was used to estimate the aggregate fair value of the Replacement Warrants immediately prior to the July 2, 2018 Short-Term Note Conversion Agreement amendment. Input assumptions used were as follows: a risk-free interest rate of 2.65 percent; expected volatility of 50 percent; expected life of 3.39 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. Additional Warrants Each Additional Warrant issued on March 12, 2018 granted the holder the option to purchase up to the number of shares of capital stock of the Company equal to the product obtained by multiplying (i) the outstanding principal amount of the Amended and Restated Short-Term Note held by such holder and (ii) 0.75; at a per share exercise price of $1.80. The Additional Warrants were exercisable commencing on the Conversion Date and would have expired on November 21, 2021. The exercise price and number of the shares issuable upon exercising the Additional Warrants were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described therein. The Additional Warrants were deemed to be free-standing instruments and were accounted for as equity as there were no variable terms. 189,750 shares of common stock were issuable upon exercise of the Additional Warrants as of the March 12, 2018 amendment date with terms that largely paralleled the provisions of the Original Warrants except that the Additional Warrants were exercisable on the Conversion Date as opposed to the Short-Term Note Maturity Date and the expiration date was moved up to November 21, 2021 from July 31, 2023. The fair value differential between the Original Warrants and the Additional Warrants was a reduction of $22,624. The fair value change was recorded as a reduction to additional paid-in capital in the accompanying condensed balance sheets and was included as part of the extinguishment loss discussed further below. Premium Conversion Derivative Upon the March 2018 amendment, the Amended and Restated Short-Term Notes contained a 125% conversion premium in the event that a Short Term Note Qualified Financing occurred at a price under $2.25 per share. The Company determined that the redemption feature under the Short-Term Notes qualified as an embedded derivative and was reflected as a liability in the amount of $49,668 at the time of the March 12, 2018 amendment with a corresponding offset to extinguishment loss which is described further below. Subsequent to the amendment, the embedded derivative was accounted for separately on a fair market value basis. The Company recorded the fair value changes of the premium debt conversion derivative associated with the Short-Term Notes in the consolidated statements of operations for a benefit of $(49,668) for the nine month transition period ended September 30, 2018. Other The March 2018 amendment resulted in a substantial modification to the Short-Term Notes whereby additional conversion features and warrant coverage were added. The Company recorded the Short-Term Note amendment under the provisions of extinguishment accounting. A loss on note extinguishments in the accompanying consolidated statements of operations for the nine month transition period ended September 30, 2018 was recorded in the amount of $186,220, which represented the difference between the carrying value of the Short-Term Notes and Original Warrants over the combined fair values of the Short-Term Notes, premium conversion derivative, Replacement Warrant and Additional Warrants on the date of the amendment. The fair value decrease of the Short-Term Notes (inclusive of principal and interest, non-bifurcated embedded conversion feature and the Additional Warrants) relative to its adjusted carrying value at the time of the amendment was $1,170 which was recorded as a reduction to additional paid-in capital on the accompanying consolidated balance sheets. Unsecured Loans In May 17, 2018, the Company received cash proceeds of $168,000 from unsecured loans, represented by two promissory notes from existing stockholders of the Company. The loans are interest free and require that the Company repay the principal in full on the earlier to occur of (i) May 17, 2019 or (ii) the closing of an equity round of financing of the Company that raises more than $5 million in gross proceeds. The loans include customary events of default provisions. On March 20, 2018, the Company received cash proceeds from an unsecured loan, represented by a promissory note, for $115,000 from an existing stockholder. The loan is interest free and requires that the Company repay the principal in full on the earlier to occur of (i) March 20, 2019 or (ii) the closing of an equity round of financing of the Company that raises more than $3 million in gross proceeds. The loan includes customary events of default provisions. |
Convertible Promissory Notes an
Convertible Promissory Notes and Warrant Agreements | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Debt Disclosure [Abstract] | ||
Convertible Promissory Notes and Warrant Agreements | NOTE 8 – Convertible Promissory Notes and Warrant Agreements As of December 31, As of 2017 convertible promissory notes, net of discounts $ 1,540,000 $ 1,306,776 Accrued interest 117,828 87,028 $ 1,657,828 $ 1,393,804 2016 Convertible Promissory Notes From November 2016 to June 2017, the Company issued convertible promissory notes (the “Convertible Notes”) in an aggregate principal amount of $1,625,120 and common stock purchase warrants (the “Warrants”) and entered into subscription agreements with subscribers. The Company amended the Convertible Notes in December 2016 and November 2017 and the Warrants in June 2017 and November 2017 to, among other things, change the terms of the underlying Warrants that included the removal of down round pricing protection. On July 2, 2018, the Company entered into debt conversion agreements with each Convertible Note subscriber to (i) convert the Outstanding Balance under the Convertible Notes into shares of the Company’s common stock based on the Outstanding Balance divided by $1.80 per share (the “2016 Note Conversion Shares”); (ii) cancel and extinguish the Convertible Notes; and (iii) amend and restate the Warrants to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Convertible Notes, the Company issued each subscriber an additional new warrant (the “2016 Note Payment Warrants”), exercisable for up to the number of shares of common stock equal to the number of 2016 Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. The 2016 Note Payment Warrants became exercisable commencing on July 2, 2018 and expire on November 21, 2021. The November 2017 amendment to the notes resulted in a substantial modification to the original Convertible Notes whereby the maturity date was extended and the terms associated with the Warrants were revised. The Company recorded the Convertible Note amendment under the provisions of extinguishment accounting. The fair value of the underlying Convertible Notes was $97,223 lower than the carrying value of the Convertible Notes on the date of the modification. The $97,223 difference was recorded as a discount to the debt with a gain on convertible note extinguishments in the accompanying condensed consolidated statements of operations for the three months ended December 31, 2017. The discount of $97,223 was then amortized from November 21, 2017 to December 31, 2017 totaling $15,756. During the three months ended December 31, 2017, interest on the principal was $32,502 and interest related to amortization of discounts related to the bifurcation of premium derivative liability, separation of warrants, revaluation discounts and issuance costs amounted to $261,749. The fair value changes related to the underlying premium conversion derivative and warrant liability amounted to a benefit of ($108,641) and an expense of $272,059, respectively, during the three month period ended December 31, 2017. As noted above, the Convertible Notes were converted into shares of common stock and not outstanding during the three month period ended December 31, 2018. 2017 Convertible Notes From October 2017 to May 2018, the Company issued convertible notes (the “2017 Convertible Notes”) in an aggregate principal amount of $1,540,000 that bear interest at a fixed rate of 8% per annum and warrants to purchase shares of the Company’s capital stock (the “New Warrants”). The Company initially entered into a subscription agreement with certain accredited investors and closed the initial private placement of the 2017 Convertible Notes in October 2017. In December 2017, the Company and holders of a majority in aggregate principal amount of the 2017 Convertible Notes entered into an amended and restated subscription agreement to amend the terms of the 2017 Convertible Notes and New Warrants. On December 31, 2018, the 2017 Convertible Notes were amended again to extend the maturity date from December 31, 2018 to June 30, 2019. The amendment was accounted for as a troubled debt restructuring given the Company’s financial condition and given the concession granted by the lenders with regards to pushing out the maturity date to June 30, 2019 with no corresponding compensation paid for the extension. The future undiscounted cash flows of the of the 2017 Convertible Notes as amended exceeded their carrying value as of December 31, 2018. As such, no gain was recognized during the three months ended December 31, 2018 and no adjustments were made to the 2017 Convertible Note carrying value. The 2017 Convertible Notes require the Company to repay the principal and accrued and unpaid interest thereon on June 30, 2019 (the “2017 Convertible Notes Maturity Date”). If the Company consummates an equity round of financing resulting in more than $3 million in gross proceeds before June 30, 2019 (the “2017 Convertible Notes Qualified Financing”), the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes shall automatically convert into the securities issued by the Company in the 2017 Convertible Notes Qualified Financing equal to the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. The New Warrants also become exercisable upon a 2017 Convertible Notes Qualified Financing for an amount of shares equal to the number of shares received by the holder in the 2017 Convertible Notes Qualified Financing at the same price per share of the securities issued in the 2017 Convertible Notes Qualified Financing. Prior to the December 2017 amendment, if the Company had raised more than $3,000,000 in an equity financing before October 4, 2022, the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of such securities resulting from either (i) the outstanding principal and accrued interest on the 2017 Convertible Notes divided by $2.25 or (ii) the outstanding principal and accrued interest on the 2017 Convertible Notes multiplied by 1.25, divided by the price paid per security in such financing. The New Warrants would have also become exercisable in conjunction with the 2017 Convertible Notes Qualified Financing. Lastly, if a change of control transaction occurs prior to the earlier of a 2017 Convertible Notes Qualified Financing or the 2017 Convertible Notes Maturity Date, the 2017 Convertible Notes would, at the election of the holders of a majority of the outstanding principal of the 2017 Convertible Notes, either become payable on demand as of the closing date of such transaction, or become convertible into shares of common stock immediately prior to such transaction at a price per share equal to the lesser of (i) the per share value of the common stock as determined by the Board as if in connection with the granting of stock based compensation or in a private sale to a third party in an arms-length transaction or (ii) at the per share consideration to be paid in such transaction. Change of control means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the Company’s assets. The New Warrants also become exercisable upon a change of control transaction for an amount of shares equal to the number of shares received by the holder upon conversion in connection with such transaction at the same price per share that the 2017 Convertible Notes converted in the change of control transaction. The December 2017 amendment resulted in a substantial modification to the original 2017 Convertible Notes whereby the maturity date was moved up to December 2018 from October 2022 and the terms associated with the embedded features were revised as described previously. The Company recorded the 2017 Convertible Note amendment under the provisions of extinguishment accounting. The fair value of the underlying Convertible Notes was $294,615 higher than the carrying value of the Convertible Notes net of unamortized debt discount on the date of the modification. The $294,615 difference as well as legal costs associated with the amendment in the amount of $8,945 were recorded as a loss on convertible notes extinguishment totaling $303,560 in the accompanying condensed consolidated statements of operations for the three months ended December 31, 2017. After the modification, there remained a debt discount of $27,371 of which $6,574 and $1,286 was amortized during the three months ended December 31, 2018 and 2017, respectively. The 2017 Convertible Notes contain a conversion discount in the event of a 2017 Convertible Notes Qualified Financing to equal the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. The embedded feature qualified as an embedded derivative and was separated from its debt host. The bifurcation of the embedded derivative from its debt host resulted in a discount to the 2017 Convertible Notes in the amount of $128,525 for the convertible debt issued during the three months ended December 31, 2017; there were no issuances of 2017 Convertible Notes during the three months ended December 31, 2018. The discount is being amortized to interest expense over the term of the 2017 Convertible Notes using the straight-line method which approximates the effective interest method. The amortization expense was $62,158 and $3,815 for the three months ended December 31, 2018 and 2017, respectively. The embedded derivative is accounted for separately on a fair market value basis. The Company recorded the fair value changes of the premium debt conversion derivative associated with all of the 2017 Convertible Notes in the condensed consolidated statements of operations which amounted to an expense of $6,265 and $466 for the three months ended December 31, 2018 and 2017, respectively. The New Warrants were deemed to be a free-standing instrument and were accounted for as a liability given the variable number of shares issuable in connection with a change of control conversion event. A Monte Carlo simulation model was used to estimate the aggregate fair value of the New Warrants. Input assumptions used were as follows: risk-free interest rate of 2.52% and 2.94% as of December 31, 2018 and September 30, 2018, respectively; expected volatility of 50% as of December 31, 2018 and September 30, 2018; expected life of 5.25 and 5.21 years as of December 31, 2018 and September 30, 2018, respectively; and expected dividend yield of 0% as of December 31, 2018 and September 30, 2018. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The 2017 Convertible Note proceeds assigned to the New Warrants were zero and $336,571 during the three month period ended December 31, 2018 and 2017, respectively, which represented their fair value at issuance and were discounted from the 2017 Convertible Notes and reflected as a warrant liability. The discount was being amortized to interest expense over the term of the 2017 Convertible Notes using the straight-line method which approximates the effective interest method. The amortization expense was $163,060 and $9,971 for the three month period ended December 31, 2018 and 2017, respectively. The Company also recorded the fair value changes of the warrant liability associated with all of the 2017 Convertible Notes in the condensed consolidated statements of operations which amounted to an expense of $6,689 and a benefit of ($1,337) for the three months ended December 31, 2018 and 2017, respectively. In connection with the 2017 Convertible Notes, the Company incurred original cost of issuance in the amount of $8,133 which consisted of legal costs and was recorded as an issuance cost discount to the 2017 Convertible Notes, of which $1,431 and $157 was amortized to interest expense during the three months ended December 31, 2018 and 2017, respectively. | NOTE 8 - Convertible Promissory Notes and Warrant Agreements As of As of 2016 convertible promissory notes, net of discounts $ — $ 1,543,652 2017 convertible promissory notes, net of discounts 1,306,776 504,465 Accrued interest 87,028 120,223 Total $ 1,393,804 $ 2,168,340 2016 Convertible Promissory Notes From November 2016 to June 2017, the Company issued convertible promissory notes (the “Convertible Notes”) and common stock purchase warrants (the “Warrants”) in an aggregate principal amount of $1,625,120 and entered into subscription agreements with subscribers (the “2016 Private Placement”). Effective July 2, 2018, however, the Company entered into debt conversion agreements (the “2016 Note Conversion Agreements”) with each Convertible Note subscriber to (i) convert the Outstanding Balance under the Convertible Notes into shares of the Company’s common stock based on the Outstanding Balance divided by $1.80 per share (the “2016 Note Conversion Shares”); (ii) cancel and extinguish the Convertible Notes; and (iii) amend and restate the Warrants as defined below to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Convertible Notes, the Company issued each subscriber an additional new warrant (the “2016 Note Payment Warrants”), exercisable for up to the number of shares of common stock equal to the number of 2016 Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. The 2016 Note Payment Warrants became exercisable commencing on July 2, 2018 and expire on November 21, 2021. Pursuant to the 2016 Note Conversion Agreements, $1,804,064 of the outstanding principal and interest of the 2016 Convertible Promissory Notes was converted into 1,002,258 shares of common stock and an additional 2,004,516 shares of common stock became issuable upon exercise of the Warrants and 2016 Note Payment Warrants. The conversion of the Convertible Notes was accounted for as an extinguishment. The difference in the carrying value of the Convertible Notes coupled with the fair value of the underlying Warrants upon conversion relative to the higher fair value of the underlying common stock and collective Warrants and new 2016 Note Payment Warrants issued was $979,480. The $979,480 differential total, inclusive of the unamortized discount remaining on the Convertible Notes of $11,143 as of July 2, 2018, was recorded as a loss on note extinguishments in the accompanying consolidated statement of operations during the nine month transition period ended September 30, 2018. The Warrants and 2016 Note Payment Warrants were deemed to be free-standing equity instruments upon execution of the 2016 Note Conversion Agreements. All of the warrant terms became fixed and the terms were identical. Due to the previously granted warrants now having fixed terms, the adjusted warrant liability value of $1,031,366 was reclassified to equity. The warrants associated with the Convertible Notes became immediately exercisable on July 2, 2018 and expire November 21, 2021. The Black-Scholes model was used to determine the July 2, 2018 fair value of the warrants associated with the Convertible Notes. Input assumptions used were as follows: a risk-free interest rate of 2.65 percent; expected volatility of 49.8% percent; expected life of 3.39 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. Activity Prior to the July 2, 2018 Cancellation, Extinguishment and Conversion of the Convertible Notes The Company amended the Convertible Notes in December 2016 and November 2017 and the Warrants in June 2017 and November 2017 to, among other things, change the terms of the underlying Warrants that include the removal of down-round pricing protection provisions as described more fully below. The Convertible Notes were unsecured. The Convertible Notes accrued interest at a fixed rate of 8 percent per annum and required the Company to repay the principal and accrued and unpaid interest thereon at the earlier of July 31, 2018 or the consummation of the next equity or equity-linked round of financing resulting in more than $3.0 million in gross proceeds (a “Qualified Financing”). If a Qualified Financing had occurred before July 31, 2018, the outstanding principal and accrued and unpaid interest on the Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of securities resulting from either the outstanding principal and accrued interest on the Convertible Notes divided by $1.80, or the outstanding principal and accrued interest on the Convertible Notes multiplied by 1.25, divided by the price paid per security in the Qualified Financing. If the Company failed to complete a Qualified Financing by July 31, 2018, the Convertible Notes would have been immediately due and payable on such date. If a change of control transaction or initial public offering occurred prior to a Qualified Financing, the Convertible Notes would have, at the election of the holders of a majority of the outstanding principal of the Convertible Notes, either been payable on demand as of the closing date of such transaction, or been convertible into shares of common stock immediately prior to such transaction at a price per share equal to the lesser of the per share value as determined by the Board as if in connection with the granting of stock-based compensation, or in a private sale to a third party in an arms-length transaction, or at the per share consideration to be paid in such transaction. Change of control means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50 percent of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the assets of the Company. Prior to the June 2017 amendment, the Warrants granted holders the option to purchase either (i) if exercised after conversion of the Convertible Notes, the number of shares equal to the number of shares received by the holders upon the conversion of the Convertible Notes, or (ii) if exercised prior to conversion of the Convertible Notes, the number of shares of common stock equal to the outstanding principal and accrued interest on the Convertible Notes held by such warrant holder divided by $1.80. The Warrants were immediately exercisable on the date of issuance and would have expired on November 21, 2021. In June 2017, however, the Company amended the terms of the Warrants under the Convertible Notes to be exercisable only in the event of conversion of the outstanding principal and accrued interest on the related Convertible Notes. The amount of warrant shares to be issued became contingent and were based on the number of shares of common stock received by the holder of the Convertible Notes upon conversion of such holder’s Convertible Notes, and at an exercise price equal to the same price per share of the securities issued in the Qualified Financing. The Warrants would have expired on November 21, 2021 in the event of a Qualified Financing or would have expired unissued if the notes were not converted. Prior to the July 2018 Convertible Note extinguishment, the Warrants were deemed to be free-standing instruments and were accounted for as a liability given the variable number of shares issuable in connection with a possible change of control conversion event. For the December 31, 2017 liability valuation of the Warrants, a Monte Carlo simulation model was used to estimate the aggregate fair value. Input assumptions used were as follows: a risk-free interest rate of 2.08 percent; expected volatility of 50 percent; expected life of 3.89 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The Convertible Note proceeds assigned to the Warrants were zero and $440,919 during the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively, which represented their fair value at issuance, and were discounted from the Convertible Notes and reflected as a warrant liability. The discount was amortized to interest expense over the original term of the Convertible Notes using the straight-line method which approximated the effective interest method and was fully amortized by December 31, 2017; the amortization expense recorded was $759,004 during the year ended December 31, 2017. The Company also recorded the fair value changes of the warrant liability associated with the Convertible Notes in the consolidated statements of operations which amounted to a benefit of $(14,865) and an expense of $259,352 for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The November 2017 amendment resulted in a substantial modification to the original Convertible Notes whereby the maturity date was extended, and the terms associated with the Warrants were revised. The fair value of the underlying convertible notes was $97,223 lower than the carrying value of the Convertible Notes on the date of the modification. The $97,223 difference was recorded as a gain on note extinguishments in the accompanying statements of operations with an offsetting discount to the Convertible Notes. The discount was being amortized over the amended term of the Convertible Notes. The amortization recorded during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017 was $70,324 and $15,756, respectively. At the time of their issuance, the Convertible Notes contained a 125% conversion premium in the event that a Qualified Financing occurs at a price under $2.25 per common share. The Company determined that the redemption feature under the Convertible Notes qualified as an embedded derivative and was separated from its debt host. The bifurcation of the embedded derivative from its debt host resulted in a discount to the Convertible Notes in the amount of zero and $213,961 during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017, respectively. The discount was being amortized to interest expense over the original term of the Convertible Notes using the straight-line method which approximates the effective interest method and was fully amortized by December 31, 2017; the amortization expense recorded was $340,551 during the year ended December 31, 2017. The embedded derivative was accounted for separately on a fair market value basis. The Company recorded the fair value changes of the premium debt conversion derivative associated with the Convertible Notes in the consolidated statements of operations for a benefit of $(333,183) and $(18,428) for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. In connection with the Convertible Notes, the Company incurred issuance costs in the amount of $151,915, which included (i) a placement agent cash fee, which was $113,610 for the Convertible Notes issued through June 19, 2017 (ii) the obligation to issue a warrant to the placement agent (the “placement agent warrant”) which would have had an exercise price of $2.00 per share of common stock with a total fair value of $4,855 on date of Convertible Note issuance, and (iii) legal expenses of $33,450. The placement agent warrant was issuable at the time the private placement transaction was fully subscribed. The placement agent warrant would have been immediately exercisable on the date of issuance and would have expired five years following the date of issuance. The Company recorded an issuance cost discount to the Convertible Notes in the amount of zero and $39,781 during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017, respectively, and was fully amortized by December 31, 2017; the amortization expense recorded as interest was $74,264 during the year ended December 31, 2017. The balance of the issuance costs in the amount of $38,119 was attributed to the Warrants and was immediately recorded as interest expense upon issuance during the year ended December 31, 2017. 2017 Convertible Notes On October 4, 2017, the Company initially entered into a subscription agreement with certain investors (the “Subscribers”), pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue and sell to the Subscribers 8% convertible promissory notes (the “2017 Convertible Notes”) and warrants (the “New Warrants”) to purchase shares of the Company’s capital stock in the event of a conversion event. The number of shares and pricing per share of the New Warrants are based on the underlying conversion event and are exercisable for five years commencing on the triggering conversion event. The subscription agreement, the 2017 Convertible Notes and New Warrants were amended on December 14, 2017 to move up the maturity date of the 2017 Convertible Notes from October 4, 2022 to December 31, 2018, remove subordination provisions and simplify the conversion provision of the 2017 Convertible Notes in the event of a qualified financing as described more fully below, to modify the exercise price of the New Warrants and to increase the authorized subscription amount to $1,500,000. In May 2018, the Board approved an increase in the authorized subscription amount from $1,500,000 to $2,000,000 and extended the offering period from the five month anniversary of the initial closing to the eight month anniversary of the initial closing. The initial closing of the Private Placement was consummated on October 4, 2017, and the Company entered into additional subscription agreements and issued 2017 Convertible Notes in an aggregate principal amount of $1,540,000 to the Subscribers through June 2018 when the Private Placement expired. The 2017 Convertible Notes bear interest at a fixed rate of 8% per annum and require the Company to repay the principal and accrued and unpaid interest thereon on December 31, 2018 (the “2017 Convertible Notes Maturity Date”). If the Company consummates an equity round of financing resulting in more than $3 million in gross proceeds before December 31, 2018 (the “2017 Convertible Notes Qualified Financing”), the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes shall automatically convert into the securities issued by the Company in the 2017 Convertible Notes Qualified Financing equal to the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. The New Warrants also become exercisable upon a 2017 Convertible Notes Qualified Financing for an amount of shares equal to the number of shares received by the holder in the 2017 Convertible Notes Qualified Financing at the same price per share of the securities issued in the 2017 Convertible Notes Qualified Financing. Prior to the December 2017 amendment, if the Company had raised more than $3,000,000 in an equity financing before October 4, 2022, the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of such securities resulting from either (i) the outstanding principal and accrued interest on the 2017 Convertible Notes divided by $2.25 or (ii) the outstanding principal and accrued interest on the 2017 Convertible Notes multiplied by 1.25, divided by the price paid per security in such financing. The New Warrants would have also become exercisable in conjunction with the 2017 Convertible Notes Qualified Financing. Lastly, if a change of control transaction occurs prior to the earlier of a 2017 Convertible Notes Qualified Financing or the 2017 Convertible Notes Maturity Date, the 2017 Convertible Notes would, at the election of the holders of a majority of the outstanding principal of the 2017 Convertible Notes, either become payable on demand as of the closing date of such transaction, or become convertible into shares of common stock immediately prior to such transaction at a price per share equal to the lesser of (i) the per share value of the shares of common stock as determined by the Board as if in connection with the granting of stock based compensation or in a private sale to a third party in an arms-length transaction or (ii) at the per share consideration to be paid in such transaction. Change of control means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the Company’s assets. The New Warrants also become exercisable upon a change of control transaction for an amount of shares equal to the number of shares received by the holder upon conversion in connection with such transaction at the same price per share that the 2017 Convertible Notes converted in the change of control transaction. The December 2017 amendment resulted in a substantial modification to the original 2017 Convertible Notes. The Company recorded the 2017 Convertible Note amendment under the provisions of extinguishment accounting. The fair value of the underlying Convertible Notes was $294,615 higher than the carrying value of the Convertible Notes net of unamortized debt discount on the date of the modification. The $294,615 difference as well as legal costs associated with the amendment in the amount of $8,945 were recorded as a loss on convertible notes extinguishments totaling $303,560 in the accompanying statements of operations for the year ended December 31, 2017. After the modification, there remained a debt discount of $27,371 of which $19,510 and $1,286 was amortized during the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The 2017 Convertible Notes contain a conversion discount in the event of a 2017 Convertible Notes Qualified Financing to equal the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. The embedded feature qualified as an embedded derivative and was separated from its debt host. The bifurcation of the embedded derivative from its debt host resulted in a discount to the 2017 Convertible Notes in the amount of $168,384 and $128,525 for the convertible debt issued during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017, respectively. The discount is being amortized to interest expense over the term of the 2017 Convertible Notes using the straight-line method which approximates the effective interest method. The amortization expense was $143,166 and $3,815 for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The embedded derivative is accounted for separately on a fair market value basis. The Company recorded the fair value changes of the premium debt conversion derivative associated with all of the 2017 Convertible Notes in the consolidated statements of operations which amounted to an expense of $11,020 and $466 for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The New Warrants were deemed to be free-standing instruments and were accounted for as a liability given the variable number of shares issuable in connection with a change of control conversion event. A Monte Carlo simulation model was used to estimate the aggregate fair value of the New Warrants. Input assumptions used were as follows: a risk-free interest rate of 2.94 percent and 2.22 percent as of September 30, 2018 and December 31, 2017, respectively; expected volatility of 50 percent as of September 30, 2018 and December 31, 2017; expected life of 5.21 years and 5.38 years as of September 30, 2018 and December 31, 2017, respectively; and expected dividend yield of 0 percent as of September 30, 2018 and December 31, 2017. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The 2017 Convertible Note proceeds assigned to the New Warrants were $442,151 and $336,571 during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017, respectively, which represented their fair value at issuance and were discounted from the 2017 Convertible Notes and reflected as a warrant liability. The discount is being amortized to interest expense over the term of the 2017 Convertible Notes using the straight-line method which approximates the effective interest method. The amortization expense was $375,076 and $9,971 for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The Company also recorded the fair value changes of the warrant liability associated with all of the 2017 Convertible Notes in the consolidated statements of operations which amounted to an expense of $39,770 and a benefit of $(1,337) for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. In connection with the 2017 Convertible Notes, the Company incurred issuance costs in the amount of $8,133 which consisted of legal costs and was recorded as an issuance cost discount to the 2017 Convertible Notes, of which $2,944 and $157 was amortized to interest expense during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017, respectively. 2017 Convertible Note Subscription Agreement Pursuant to the subscription agreements entered into in connection with the Private Placement, the Company is entitled to receive notice in the event a holder elects to sell or receives a bona fide offer for any portion of the 2017 Convertible Notes or New Warrants, as applicable, and the right to purchase the 2017 Convertible Notes and associated New Warrants on the same terms as the proposed sale or bona fide offer, as applicable, as long as the Company exercises that right within 15 days of receiving written notice. The Company has granted the subscribers indemnification rights with respect to its representations, warranties, covenants and agreements under the respective subscription agreements. |
Defined Contribution Plan
Defined Contribution Plan | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Retirement Benefits [Abstract] | ||
Defined Contribution Plan | NOTE 9 – Defined Contribution Plan The Company adopted a 401(k) defined contribution plan (the "401K Plan") on January 1, 2017, which was amended and restated on March 1, 2018 (the "Restatement"), for all employees over age 21. Employees can defer up to 100% of their compensation through payroll withholdings into the 401K Plan subject to federal law limits. The Company began matching in the fourth quarter of 2017 on deferrals at 100% of deferrals up to 3% of one's contributions and 50% on deferrals over 3%, but not exceeding 5% of one's contributions up through the Restatement. The Company's matching contributions to employee deferrals became discretionary after the Restatement. The Company may also make discretionary profit sharing contributions under the 401K Plan in the future, but it has not done so through December 31, 2018. Employee contributions and any employer matching contributions made to satisfy certain non-discrimination tests required by the Internal Revenue Code are 100% vested upon contribution. Discretionary employer matches to employee deferrals vest over a six year period beginning on the second anniversary of an employee's date of hire. Discretionary profit sharing contributions vest over a five year period beginning on the first anniversary of an employee's date of hire. The amount of matching contributions made during the three month period ended December 31, 2018 and 2017 was a benefit reduction of $(4,359) and $27,000, respectively. | NOTE 12 - Defined Contribution Plan The Company adopted a 401(k) defined contribution plan (the “401K Plan”) on January 1, 2017, which was amended and restated on March 1, 2018 (the “Restatement”), for all employees over age 21. Employees can defer up to 100% of their compensation through payroll withholdings into the 401K Plan subject to federal law limits. The Company began matching in the fourth quarter of 2017 on deferrals at 100% of deferrals up to 3% of one’s contributions and 50% on deferrals over 3%, but not exceeding 5% of one’s contributions up through the Restatement. The Company’s matching contributions to employee deferrals became discretionary after the Restatement. The Company may also make discretionary profit sharing contributions under the 401K Plan in the future, but it has not done so through September 30, 2018. Employee contributions and any employer matching contributions made to satisfy certain non-discrimination tests required by the Internal Revenue Code are 100% vested upon contribution. Discretionary employer matches to employee deferrals vest over a six year period beginning on the second anniversary of an employee’s date of hire. Discretionary profit sharing contributions vest over a five year period beginning on the first anniversary of an employee’s date of hire. The amount of matching contributions made during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017 was $7,779 and $27,000, respectively. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock-Based Compensation | NOTE 10 – Stock-Based Compensation During the three month periods ended December 31, 2018 and 2017, stock-based services expense related to stock-based awards amounted to $118,980 and zero, respectively, and was included in general and administrative costs in the accompanying condensed consolidated statements of operations. Stock Options During the three month period ended December 31, 2018, under the 2017 Equity Incentive Plan (the “2017 Plan”), the Company granted 175,000 stock options to its scientific advisory board members where vesting commences on January 1, 2019 over a 36 month period based on a time of service vesting condition. The grant date fair value of the scientific advisory board member grants was $1.14 per share. No stock-based expense related to the scientific advisory board grants was recognized during the three month period ended December 31, 2018. There were no stock options granted during the three month period ended December 31, 2017. Lastly, there were no restricted stock award grants during any of the periods presented. The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the three month period ended December 31, 2018: 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5.8 Expected dividend yield 0 % Risk free interest rate 2.8 % See other stock-based awards section below for stock-based award grants committed, but not formally issued as of December 31, 2018. During the three months ended December 31, 2018 and 2017, there was no vesting of formally issued stock options or restricted stock awards. No stock options were forfeited during the three months ended December 31, 2018 and 2017. As of December 31, 2018, 1,533,596 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017 Plan. Unrecognized stock-based compensation was $0.2 million as of December 31, 2018. All of the unrecognized compensation cost related to the scientific advisory board grants. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.9 years. Other Stock-Based Awards 250,000 shares of common stock were reserved in February 2018 as a result of a consulting agreement for investor relations services executed in February 2018. Under the agreement, 50,000 shares of common stock were awarded during the three month period ended December 31, 2018 on a time-based vesting condition that was met in November 2018. The compensation expense related to the vested common shares was included in the total stock-based services expense referenced above which totaled $115,000 for the three month period ended December 31, 2018. The expense was based on the fair value of the underlying common stock at the point of vesting which was $2.30 per share. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. As of November 2018, all shares under the February 2018 share reserve were issued, but were not eligible for issuance under either of the 2016 or 2017 Plans as the consulting contract was not with an individual. As of December 31, 2018, the Company had a formal obligation to issue future common stock options relating to a consulting agreement. The estimated liability associated with the vested portions of these awards was recorded in accrued expenses in the accompanying condensed consolidated balance sheets as of December 31, 2018. The corresponding stock-based services expense related to the stock-based award liability amounted to $3,980 during the three months ended December 31, 2018 and was included in general and administrative expense in the accompanying condensed consolidated statements of operations. There was no corresponding stock-based services expense during the three month period ended December 31, 2017. The number of option shares and pricing under the consulting agreement will not be set until the occurrence of the award date which is defined as the earlier to occur of a public offering, qualified financing, or June 30, 2019. The number of option shares under the agreement is based on a $3,000 monthly compensation amount divided by the fair value of the underlying common stock on the award date. The exercise price will also be set at the fair value of the underlying common stock on the award date. The liability associated with the unissued options was based on an option share equivalent estimate that reflects the portion of the award where performance vesting conditions have been met as of December 31, 2018 and was based on the fair value of the Company’s common stock on December 31, 2018 as the award date has not occurred. The common stock fair value on December 31, 2018 was $2.20 per share and was determined based on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The total accrued liability for this award at December 31, 2018 was $15,133. The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock- option liability during the three month period ended December 31, 2018: 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5 Expected dividend yield 0 % Risk free interest rate 2.5 % Upon the issuance of all of the unissued options associated with the stock-based award liabilities, the estimated number of shares available for future issuance as of December 31, 2018 would be reduced from 1,533,596 shares to 1,518,596 shares as a result of the potential stock option issuance under the second consulting agreement. | NOTE 9 - Stock-Based Compensation During the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, stock-based services expense related to the stock options, restricted stock awards and stock-based award liabilities was included in general and administrative and research and development costs as follows in the accompanying statements of operations: 2018 2017 General and administrative $ 480,653 $ 2,065 Research and development 5,467 74,729 Total stock-based services expense $ 486,120 $ 76,794 NeuroOne formally adopted an equity incentive plan (the “2016 Plan”) on October 27, 2016 which was subsequently adopted by the Company upon completion of the Acquisition. In addition, the Company adopted a 2017 Equity Incentive Plan (the “2017 Plan”) on April 17, 2017. The 2016 and 2017 Plans provide for the issuance of restricted shares and stock options to employees, directors, and consultants of the Company. The Company reserved 2,292,265 shares of common stock (as adjusted for the exchange ratio in connection with the Acquisition) for issuance under the 2016 and 2017 Plans on a combined basis. The Company began granting stock options and restricted stock awards in the second quarter of 2017. During the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, 2,500 and 365,716 stock options were granted to directors and consultants at a weighted average exercise price of $5.34 and $0.035 per share, respectively. The stock options granted during the nine month transition period ended September 30, 2018 and during the year ended December 31, 2017 had a weighted average grant date fair value of $2.48 and $0.014 per share, respectively, with the vesting period ranging from several weeks upon grant to two months from grant. The options expire ten years from the date of grant. In addition, the Company issued 215,453 shares of restricted common stock at a grant date fair value of $0.034 with performance vesting conditions from the 2016 Plan during the year ended December 31, 2017. There were no restricted common stock awards issued out of the 2016 Plan or 2017 Plan during the nine month transition period ended September 30, 2018. All performance vesting conditions for the restricted common stock were met and there were no unvested shares as of September 30, 2018 and December 31, 2017. Compensation expense associated with restricted common stock was zero and $7,220 for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017, respectively. The following table summarizes the Company’s stock option plan activity for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017 as follows: Weighted- Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term (years) Value(1) Outstanding at December 31, 2016 — — — — Granted 365,716 $ 0.03 — — Exercised — — — — Forfeited/Cancelled — — — — Outstanding at December 31, 2017 365,716 $ 0.03 9.3 $ 908,920 Granted 2,500 $ 5.34 — — Exercised — — — — Forfeited/Cancelled — — — — Outstanding at September 30, 2018 368,216 $ 0.07 8.6 $ 820,862 Vested and exercisable at September 30, 2018 368,216 $ 0.07 8.6 $ 820,862 (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of our common stock as of September 30, 2018 and December 31, 2017 of $2.30 and $2.52 per share, respectively. The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the nine month transition period ended September 30, 2018 and the year ended December 31, 2017: 2018 2017 Expected stock price volatility 49.8 % 47.8 % Expected life of options (years) 5.0 5.0 Expected dividend yield 0 % 0 % Risk free interest rate 2.8 % 1.9 % During the nine month transition period ended September 30, 2018, 2,500 stock options vested, and the weighted average grant date fair value per option was $2.48. During the year ended December 31, 2017, 365,716 stock options and 215,453 restricted stock awards vested. The weighted average grant date fair value per share of common stock issuable upon exercise of options and of restricted stock awards vesting during the year ended December 31, 2017 was $0.014 and $0.034, respectively. No stock options were forfeited during the nine month transition period ended September 30, 2018 or during the year ended December 31, 2017. As of September 30, 2018, 1,708,596 shares were available for future issuance on a combined basis under the 2016 and 2017 Plans. Other Stock-Based Awards Up to 250,000 shares of common stock were reserved in February 2018 as a result of a consulting agreement for investor relations services executed in February 2018. Under the agreement, 200,000 shares of common stock were awarded during the nine month transactional period ended September 30, 2018. The shares were awarded based on a performance vesting condition that was met in February 2018 and a time-based vesting condition that was met in both May 2018 and August 2018. The compensation expense related to the vested common shares was included in the total stock-based services expense referenced above which totaled $469,500. The expense was based on the fair value of the underlying common stock at the point of vesting which was $2.52 per share for 100,000 shares that vested in February 2018, $2.30 per share for the 50,000 shares that vested in May 2018, and $2.05 per share for the 50,000 shares that vested in August 2018. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The remaining 50,000 shares of the share commitment under the agreement vested in November 2018. Additionally, the Company recorded stock-based services expense related to unissued stock options associated with a second consulting agreement whereby the number of option shares and pricing will not be set until the occurrence of the award date which is defined as the earlier to occur of a public offering, qualified financing, or December 31, 2018 (as amended from the originally stated June 30, 2018 date). The number of option shares under the agreement is based on a $3,000 monthly compensation amount divided by the fair value of the underlying common stock on the award date. The exercise price will also be set at the fair value of the underlying common stock on the award date. The liability associated with the unissued options was based on an option share equivalent estimate that reflects the portion of the award where performance vesting conditions have been met as of September 30, 2018 and was based on the fair value of the Company’s common stock on September 30, 2018 as the award date has not occurred. The common stock fair value on September 30, 2018 was $2.30 per share and was determined based on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. The stock-based services expense associated with the unissued stock options was $11,153 during the nine month transition period ended September 30, 2018 and is classified in accrued expenses at September 30, 2018. The liability for the unissued stock options was based on the following weighted-average assumptions using the Black-Scholes option-pricing model: 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5.0 Expected dividend yield 0 % Risk free interest rate 2.9 % Upon the issuance of all of the unissued options associated with the stock-based award liabilities, the estimated number of shares available for future issuance as of September 30, 2018 would be reduced from 1,708,596 to 1,698,161 shares as a result of the remaining stock options to be issued upon vesting under the second consulting agreement. The 250,000 shares of common stock issuable under the February 2018 consulting agreement are not eligible for issuance under either the 2016 Plan or 2017 Plan because the 2016 Plan and 2017 Plan limit plan participants to individuals. |
Income Taxes
Income Taxes | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||
Income Taxes | NOTE 11 – Income Taxes The effective tax rate for the three months ended December 31, 2018 and 2017 was zero percent. As a result of the analysis of all available evidence as of December 31, 2018 and September 30, 2018, the Company recorded a full valuation allowance on its net deferred tax assets. Consequently, the Company reported no income tax benefit during the three months ended December 31, 2018 and 2017. If the Company's assumptions change and the Company believes that it will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction of future income tax expense. If the assumptions do not change, each period the Company could record an additional valuation allowance on any increases in the deferred tax assets. | NOTE 11 - Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President Trump. The TCJA contains significant changes to corporate income taxation, including, but not limited to, the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the deductibility of research and experimental expenditures that will be effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law. The Company has recorded the adjustments in the consolidated financial statements in accordance with the TCJA and related guidance with a reduction of $420,000 to its net gross deferred tax assets in December 2017, the period in which the legislation was enacted. The reduction was fully offset by an equal reduction in the Company’s valuation allowance given the Company’s historical net losses, resulting in no net income tax expense being recorded. The effective tax rate for the Company for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017 was zero percent. A reconciliation of income tax computed at the statutory federal income tax rate to the provision (benefit) for income taxes included in the accompanying consolidated statements of operations for the Company is as follows: 2018 2017 Income tax benefit at federal statutory rate (21.0 )% (34.0 )% State income tax, net of federal benefit (7.7 ) (6.5 ) Warrant expense 9.4 10.6 Disqualified interest and other 1.0 0.9 Research credits (1.5 ) (1.2 ) U.S. tax reform — 8.3 Valuation allowance 19.8 21.9 Effective tax rate — % — % Significant components of the Company’s deferred tax assets and liabilities are summarized in the tables below as of September 30, 2018 and December 31, 2017: 2018 2017 Deferred tax assets: Federal and state operating loss carryforwards $ 1,837,375 $ 871,371 Acquired intangibles 10,116 5,433 Accruals 73,763 64,151 Convertible notes 28,863 81,904 Research and development credit carryforwards 140,553 63,197 Stock-based compensation 24,598 19,821 Total deferred tax assets 2,115,268 1,105,877 Valuation allowance (2,115,268 ) (1,105,877 ) Net deferred tax assets $ — $ — The deferred tax asset for the convertible notes and the valuation allowance at December 31, 2017 were misstated by $452,845 and have both been revised in the preceding table. The effects of this revision also impacted the effective tax rate reconciliation by increasing the warrant expense percent by 10.6%, decreasing the U.S. tax reform percent by 3.8% and decreasing the valuation allowance percent by 6.8% for the year ended December 31, 2017. These immaterial adjustments to the 2017 disclosures had no impact on our net loss or reported net loss per share for the year ended December 31, 2017. As of September 30, 2018 and December 31, 2017, the Company had gross deferred tax assets of approximately $2,115,000 and $1,106,000, respectively. Realization of the deferred assets is primarily dependent upon future taxable income, if any, the amount and timing of which are uncertain. The Company has had significant pre-tax losses since its inception. The Company has not yet generated revenues and faces significant challenges to becoming profitable. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance of approximately $2,115,000 and $1,106,000 as of September 30, 2018 and December 31, 2017, respectively. U.S. net deferred tax assets will continue to require a valuation allowance until the Company can demonstrate their realizability through sustained profitability or another source of income. As of September 30, 2018 and December 31, 2017, the Company’s federal net operating loss carryforwards were approximately $6,393,000 and $3,032,000, respectively. The Company had federal research credit carryforwards as of September 30, 2018 and December 31, 2017 of approximately $83,000 and $36,000, respectively. The federal net operating loss incurred prior to January 1, 2018 and tax credit carryforwards will begin to expire in 2036 if not utilized. Federal net operating losses incurred after December 31, 2017 will not expire. As of September 30, 2018 and December 31, 2017, the Company had state net operating loss carryforwards of approximately $6,393,000 and $3,032,000, respectively. The Company had state research credit carryforwards of approximately $57,000 and $27,000 as of September 30, 2018 and December 31, 2017, respectively. The state net operating loss carryforwards will begin to expire in 2031, if not utilized, and the state research credit carryforwards will begin to expire in 2032 if not utilized. Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5-percent shareholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter. The annual limitation may result in the expiration of net operating losses and credits before utilization. In accordance with ASC 740, Income Taxes In accordance with this guidance, the Company has adopted a policy under which, if required to be recognized in the future, interest related to the underpayment of income taxes will be classified as a component of interest expense and any related penalties will be classified in operating expenses in the statements of operations. The Company’s corporate returns are subject to examination for the 2016 and 2017 tax years for federal and subject to examination for the 2016 and 2017 tax years in one state jurisdiction. |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | ||
Stockholders' Deficit | NOTE 12 – Stockholders' Deficit 2018 Private Placement From July 9, 2018 through November 30, 2018 (the final closing), the Company entered into subscription agreements (each, a "Purchase Agreement") with certain accredited investors (the "Purchasers"), pursuant to which the Company, in a private placement (the "2018 Private Placement"), agreed to issue and sell to the Purchasers units (each, a "Unit"), each consisting of (i) 1 share (each, a "Share") of common stock and (ii) a warrant to purchase 1 share of common stock at an initial exercise price of $3.00 per share (the "2018 Warrants"). The initial closing of the 2018 Private Placement was consummated on July 9, 2018. As of the termination of the 2018 Private Placement on December 12, 2018, the Company had issued and sold an aggregate of 615,200 Units at a price of $2.50 per Unit to the Purchasers, for total gross proceeds to the Company of $1,538,000 before deducting offering expenses (170,000 Units were sold during the three months ended December 31, 2018). Under the Purchase Agreement, the Company agreed to use the net proceeds from the 2018 Private Placement to pay the outstanding principal and accrued interest on its 2017 Convertible Notes if such notes did not convert prior to maturity, to pay the principal on its unsecured term loans, for research and development, clinical studies, legal fees and sales and marketing expenses, as well as working capital and general corporate purposes. The Company granted the Purchasers indemnification rights with respect to its representations, warranties and agreements under the Purchase Agreement. The 2018 Warrants are exercisable beginning on the date of issuance and will expire on July 9, 2023, five years from the date of the first closing. The 2018 Warrants were accounted for as free standing equity instruments and classified as additional paid-in capital in the accompanying condensed consolidated balance sheets based on their relative fair value to the underlying common shares issued. The fair value of the 2018 Warrants issued during the three months ended December 31, 2018 was $144,005 and was based on the Black-Scholes pricing model. Input assumptions used were as follows on a weighted average basis: a risk-free interest rate of 2.85%; expected volatility of 49.8%; expected life of 4.62 years; and expected dividend yield of 0%. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. In connection with the 2018 Private Placement, the Company recorded issuance costs in the amount of $59,694 during the three month period ended December 31, 2018. The issuance costs included commissions to the brokers equal to 10% of the gross proceeds from the sale of the Units that qualify for the commission which amounted to $42,500. In addition to the brokers' commission, the issuance costs included the estimated value of the 5-year warrants to be issued to the brokers to purchase an amount of common stock equal to 10% of the total amount of qualifying Shares sold in the 2018 Private Placement at an exercise price of $3.45 per share upon the close of the 2018 Private Placement. A commission liability increase in the amount of $9,854 was recorded during the three months ended December 31, 2018 related to the 50,520 broker warrants issuable upon the close of the 2018 Private Placement. Lastly, third party legal costs in the amount $7,340 comprised the balance of the issuance costs incurred during the three months ended December 31, 2018. See Note 13 – Subsequent Events for changes in the commission structure under the 2018 Private Placement. In connection with the 2018 Private Placement, the Company entered into registration rights agreements with each of the Purchasers pursuant to which the Company agreed to file a registration statement with the SEC covering the resale of the shares of common stock sold in the 2018 Private Placement and the shares of common stock issuable upon exercise of the 2018 Warrants. The Company agreed to file such registration statement within 75 days of the final closing of the 2018 Private Placement. Each registration rights agreement included customary indemnification rights in connection with the registration statement. 2019 Private Placement On December 12, 2018, the Board of Directors of the Company terminated the 2018 Private Placement. On December 28, 2018 and December 31, 2018, the Company entered into Subscription Agreements (each, a "2019 Purchase Agreement") with certain accredited investors (the "New Purchasers"), pursuant to which the Company, in a new private placement (the "2019 Private Placement"), agreed to issue and sell Units (the "2019 Units") to the New Purchasers. The initial closing of the 2019 Private Placement was consummated on December 28, 2018. On December 28, 2018 and December 31, 2018, the Company issued and sold an aggregate of 160,000 2019 Units at $2.50 per Unit to the New Purchasers, for total gross proceeds to the Company of approximately $400,000 before deducting offering expenses. In connection with the 2019 Private Placement, the Company has agreed to issue and sell to accredited investors up to a maximum of 4,000,000 2019 Units (the "Maximum Offering") at a price of $2.50 per 2019 Unit for total gross proceeds to the Company of up to $10,000,000. The Maximum Offering may be increased by the Company in its sole discretion, without notice. If the Company issues the Maximum Offering amount, 4,000,000 shares of common stock would be issuable upon exercise of the warrants (the "2019 Warrants"). Under the 2019 Purchase Agreement, the Company has agreed to use the net proceeds from the 2019 Private Placement to pay the outstanding principal and accrued interest on its convertible promissory notes if such notes do not convert prior to maturity, to pay the principal on its unsecured term loans, for research and development, clinical studies, legal fees and sales and marketing expenses, as well as working capital and general corporate purposes. The Company has granted the New Purchasers indemnification rights with respect to its representations, warranties and agreements under the 2019 Purchase Agreement. The 2019 Warrants are exercisable beginning on the date of issuance and will expire on December 28, 2023, five years from the date of the first closing of the 2019 Private Placement. Prior to expiration, subject to the terms and conditions set forth in the 2019 Warrants, the holders may exercise the 2019 Warrants for shares of common stock by providing notice to the Company and paying the $3.00 per share exercise price for each share so exercised. The fair value of the 2019 Warrants issued during the three months ended December 31, 2018 was $134,048 and was based on the Black-Scholes pricing model. Input assumptions used were on a weighted average basis as follows: a risk-free interest rate of 2.53%; expected volatility of 49.8%; expected life of 5.0 years; and expected dividend yield of 0%. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. In connection with the 2019 Private Placement, the Company recorded issuance costs in the amount of $89,622 as of December 31, 2018. In connection with the 2019 Private Placement, Paulson Investment Company, LLC ("Paulson") will receive a cash commission equal to 12% of the gross proceeds from the sale of the 2019 Units. In addition to the brokers' commission, the Company will issue 5-year warrants to Paulson to purchase an amount of Common Stock equal to 10% of the total amount of Shares sold in the 2019 Private Placement at an exercise price of $2.75 per share. The issuance costs included commissions to the broker equal to 12% of the gross proceeds from the sale of the 2019 Units and related expenses that amounted to $73,000. In addition to the broker's commission, the issuance costs included the estimated value of the 5-year warrants to be issued to the broker to purchase an amount of common stock equal to 10% of the total amount of Shares sold in the 2019 Private Placement, at an exercise price of $2.75 per share, upon the close of the 2019 Private Placement. A liability in the amount of $13,875 was recorded as of December 31, 2018 related to the 16,000 broker warrants issuable as of December 31, 2018 under the 2019 Private Placement. Lastly, third party legal costs in the amount $2,747 comprised the balance of the issuance costs incurred as of December 31, 2018. See Note 13 – Subsequent Events for subsequent 2019 Unit issuances and changes in the commission structure under the 2019 Private Placement. In connection with the 2019 Private Placement, the Company entered into a registration rights agreement with each of the New Purchasers, each dated as of the respective closing dates (each, a "Registration Rights Agreement"), pursuant to which the Company has agreed to file a registration statement with the SEC covering the resale of the shares of common stock sold in the 2019 Private Placement and the shares of common stock issuable upon exercise of the 2019 Warrants. The Company has agreed to file such registration statement within 75 days of the final closing of the 2019 Private Placement. Each Registration Rights Agreement includes customary indemnification rights in connection with the registration statement. Warrant Activity and Summary The following table summarizes warrant activity during the three month period ended December 31, 2018: Exercise Weighted Average Warrants Per Exercise Outstanding and exercisable at September 30, 2018 2,927,572 $ 1.80 - 3.00 $ 1.98 Issued 330,000 $ 3.00 $ 3.00 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at December 31, 2018 3,257,572 $ 1.80 - $3.00 $ 2.09 As of December 31, 2018, 66,520 warrants are committed to be issued related to the 2018 and 2019 Private Placements at an exercise price of $3.45 and $2.75 per share, respectively. | NOTE 10 - Stockholders' Deficit Private Placement and Corresponding Issuance of Common Stock and Warrants From July 9, 2018 through September 28, 2018, the Company entered into subscription agreements (each, a "Purchase Agreement") with certain accredited investors (the "Purchasers"), pursuant to which the Company, in a private placement (the "2018 Private Placement"), agreed to issue and sell to the Purchasers units (each, a "Unit"), each consisting of (i) 1 share (each, a "Share") of the Company's common stock and (ii) a warrant to purchase 1 share of common stock at an initial exercise price of $3.00 per share (the "2018 Warrants"). The initial closing of the 2018 Private Placement was consummated on July 9, 2018. As of September 30, 2018, the Company has issued and sold an aggregate of 445,200 Units to the Purchasers, for total gross proceeds to the Company of approximately $1,113,000 before deducting offering expenses. In connection with the 2018 Private Placement, the Company has agreed to issue and sell to accredited investors up to a maximum of 4,000,000 Units (the "Maximum Offering") at a price of $2.50 per Unit for total gross proceeds to the Company of up to $10,000,000. If the 2018 Private Placement is over-subscribed, the Company may, in its discretion sell up to an additional 600,000 Units (the "Over-Allotment") to cover such over subscriptions. If the Company issues the Maximum Offering amount, 4,000,000 shares of Common Stock (4,600,000 shares of Common Stock if the Over-Allotment is exercised) would be issuable upon exercise of the 2018 Warrants. The Company may conduct any number of additional closings so long as the final closing occurs on or before January 2, 2019. Under the Purchase Agreement, the Company has agreed to use the net proceeds from the 2018 Private Placement to pay the outstanding principal and accrued interest on its 2017 Convertible Notes if such notes do not convert prior to maturity, to pay the principal on its unsecured term loans, for research and development, clinical studies, legal fees and sales and marketing expenses, as well as working capital and general corporate purposes. The Company has granted the Purchasers indemnification rights with respect to its representations, warranties and agreements under the Purchase Agreement. The 2018 Warrants are exercisable beginning on the date of issuance and will expire on July 9, 2023, five years from the date of the first closing. The 2018 Warrants were accounted for as free standing equity instruments and classified as additional paid-in capital in the accompanying consolidated balance sheets based on their relative fair value to the underlying common shares issued. The fair value of the 2018 Warrants issued was $318,759 and was based on the Black-Scholes pricing model. Input assumptions used were as follows: a risk-free interest rate of 2.82 percent; expected volatility of 49.8 percent; expected life of 4.91 years; and expected dividend yield of 0 percent. The underlying stock price used in the analysis was on a non-marketable basis and was according to the market approach, considering both the traded price and forward multiples from guideline public companies, using allocation and marketability-discount methodologies. In connection with the 2018 Private Placement, the Company recorded issuance costs in the amount of $173,067 as of September 30, 2018. The issuance costs included commissions to the brokers equal to 10% of the gross proceeds from the sale of the Units that qualify for the commission and amounted to $83,800. In addition to the brokers' commission, the issuance costs included the estimated value of the 5-year warrants to be issued to the brokers to purchase an amount of Common Stock equal to 10% of the total amount of qualifying Shares sold in the 2018 Private Placement at an exercise price of $3.45 per share upon the close of the 2018 Private Placement. A liability in the amount of $26,878 was recorded as of September 30, 2018 related to the broker warrants. Lastly, third party legal costs in the amount $62,389 comprised the balance of the issuance costs incurred as of September 30, 2018. In connection with the 2018 Private Placement, the Company entered into registration rights agreements with each of the Purchasers pursuant to which the Company has agreed to file a registration statement with the SEC covering the resale of the shares of common stock sold in the 2018 Private Placement and the shares of Common Stock issuable upon exercise of the 2018 Warrants. The Company has agreed to file such registration statement within 75 days of the final closing of the 2018 Private Placement. Each registration rights agreement includes customary indemnification rights in connection with the registration statement. Warrant Activity and Summary The following table summarizes warrant activity during the year ended December 31, 2017 and the nine month transition period ended September 30, 2018: Exercise Price Weighted Average Warrants Per Exercise Outstanding at January 1, 2017 — $ — $ — Issued 189,750 $ 1.80 $ 1.80 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at December 31, 2017 189,750 $ 1.80 $ 1.80 Issued 2,737,822 $1.80 - 3.00 $ 2.00 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at September 30, 2018 2,927,572 $1.80 - 3.00 $ 1.98 The following table summarizes information about warrants outstanding at September 30, 2018: Exercise Price Number Outstanding Weighted Average Remaining Contractual life (Years) Number Exercisable at September 30, 2018 $ 1.80 2,482,372 3.1 2,482,372 $ 3.00 445,200 4.8 445,200 Total 2,927,572 2,927,572 The July 2017 Acquisition Pursuant to the Acquisition of NeuroOne on July 20, 2017, the Company acquired 100% of NeuroOne shares in exchange for the issuance of Company shares and NeuroOne became the Company's wholly-owned subsidiary. Also, at the closing, Mr. Samad (the majority owner of the Company prior to the Acquisition) tendered for cancellation 3,500,000 Company shares held by him as part of the conditions to closing resulting in a net exchange of 1,573,000 shares of common stock (see further details in Note 1 – Organization and Nature of Operations). At the time of Acquisition, the Company had authorized 100,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. Predecessor NeuroOne, Inc. Activity On October 20, 2016, prior to the Merger with the LLC, NeuroOne issued 5,131,514 shares of common stock (as adjusted for the exchange ratio in connection with the Acquisition) as founders' shares to seven individuals. Three of those investors were officers of NeuroOne. NeuroOne recorded $9,050 of share subscription receivable for these stock issuances in 2016, which remained outstanding as of December 31, 2016. The shares were subscribed at value of $0.03 per share based on a valuation prepared by NeuroOne utilizing a weighted average market value of invested capital methodology. In June 2017, the purchase price owed by the seven individuals for the founders' shares of NeuroOne under their respective subscription agreements totaling $9,050 was forgiven by NeuroOne prior to the Acquisition. |
Subsequent Events
Subsequent Events | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Subsequent Events [Abstract] | ||
Subsequent Events | NOTE 13 – Subsequent Events 2019 Private Placement – Subsequent Issuances and Broker Compensation Change The Company issued 2019 Units for aggregate gross proceeds of $592,500 from January 1, 2019 through February 25, 2019. See Note 12 – Stockholders Deficit for more information on the 2019 Units. In February 2019, the Company amended its engagement letter with HRA Capital (“HRA”), acting through its affiliate, Corinthian Partners, LLC, each of which are affiliates of one of the Company’s greater than 5% stockholders. Pursuant to the original agreement (prior to the amendment), the Company agreed to pay HRA 10% of the gross proceeds (the “HRA Fee”) received by the Company in subsequent private placement transactions from investors with whom HRA or Corinthian Partners, LLC had material contact with for purposes of the engagement letter (the “Prospects”), provided such compensation would only be paid in connection with private placement transactions that closed within 12 months of the expiration of the engagement letter (the “Tail Period”). The Company agreed to issue to HRA warrants to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 10% of the shares purchased by Prospects during the Tail Period (“HRA Warrants”). In February 2019, the Company and HRA agreed (i) to extend the Tail Period until June 30, 2019, (ii) to modify the HRA Fee so that HRA is entitled to receive a cash fee equal to 8% of the gross proceeds received by the Company from Prospects in all subsequent private placement transactions and (iii) to modify the HRA Warrants so that they are exercisable to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 8% of the shares of Common Stock purchased by Prospects in subsequent private placements (collectively, the “HRA Amendments”). Upon issuance, the HRA Warrants will be immediately exercisable and expire five years from the closing of the related transaction. The cash commission and broker’s commission to be received by Paulson were not impacted by the changes to the agreement between the Company and HRA. 2018 Private Placement – Broker Compensation Change In connection with the 2018 Private Placement, the Company agreed to pay the brokers a cash commission equal to 10% of the gross proceeds from the sale of the Units sold to investors by such brokers. In addition to the brokers’ commission, the Company agreed to issue 5-year warrants to the brokers to purchase an amount of Common Stock equal to 10% of the total amount of shares sold by such brokers in the 2018 Private Placement, at an exercise price of $3.45 per share. Notwithstanding the Company’s agreement to pay to brokers the 10% cash commission and issue warrants for 10% of the shares sold in the 2018 Private Placement, the HRA Amendments modified the broker commission arrangements with respect to HRA. HRA was the only broker in the 2018 Private Placement. Pursuant to the Company’s engagement letter with HRA (acting through the registered broker-dealer, Corinthian Partners, LLC), as amended in February 2019 by the HRA Amendments, the Company agreed to pay HRA a cash fee equal to 8% of the gross proceeds received by the Company from Prospects in the 2018 Private Placement and to issue warrants exercisable to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 8% of the shares of Common Stock purchased by Prospects in the 2018 Private Placement. | NOTE 13 - Subsequent Events 2018 Private Placement Between October 1, 2018 through November 30, 2018, the Company issued and sold an aggregate of 170,000 additional Units to the Purchasers, for total gross proceeds to the Company of approximately $425,000 before deducting offering expenses. The additional Units have identical terms to the 2018 Private Placement disclosed in Note 10 – Stockholders’ Deficit. Unsecured Loans In November 2018, the Company received cash gross proceeds from unsecured loans represented by two promissory notes in the amounts of $45,000 and $100,000 from stockholders who each owned over 5% of the Company’s common stock. The loans are interest free and require that we repay the principal in full on the earlier of the closing of an equity round of financing of the Company resulting in more than $5 million in gross proceeds or November 14, 2019. Advisory Board Stock Option Grants In November 2018 and December 2018 the Board of Directors approved for grant, to seven scientific advisory board members, a total of 175,000 stock options for the purchase of common stock. The options when issued will vest monthly over a three year period commencing January 1, 2019. Office Lease The Company leased a 5,196 square foot facility for use as its corporate headquarters location in Minnetonka, Minnesota effective December 1, 2018. The lease expires on October 31, 2019 and the monthly rent is $4,763. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||
Basis of Presentation and Change in Fiscal Year | Basis of Presentation and Change in Fiscal Year The accompanying consolidated financial statements have been prepared in accordance with accounting standards generally accepted in the United States of America, In September 2018, the Board of Directors of the Company, pursuant to the bylaws and based upon the recommendation of its Audit Committee, approved a change in the Company’s fiscal year end from December 31 to September 30. The Company’s fiscal year now begins on October 1 and ends on September 30 of each year, starting on October 1, 2018. The required transition period of January 1, 2018 to September 30, 2018 is included in the consolidated financial statements. For comparative purposes, the unaudited consolidated statements of operations and consolidated statements of cash flows for the nine months ended September 30, 2017 are also presented. | |
Management's Use of Estimates | Management’s Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. | Management’s Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company’s cash is held by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of December 31, 2018, the Company did have deposits in excess of federally insured amounts by $134,109. | Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company’s cash is held by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of September 30, 2018, the Company did not have any deposits in excess of federally insured amounts. |
Common Stock Valuation | Common Stock Valuation Due to the limited market liquidity for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. The valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, and the likelihood of achieving a liquidity event, such as an offering or sale. Significant changes to the key assumptions used in the valuations may result in different fair values of common stock at each valuation date. The Company estimated its enterprise value on a continuing operations basis, using the market approach, with certain adjustments relating to the thinly traded status of the Company. The traded price of the Company was deemed not to be an entirely reliable indication of fair market value given the lack of trading liquidity. Therefore, in addition to applying partial weighting to the traded price, the Company relied on forward revenue multiples from guideline public companies (“GPC”) for calendar year 2019 and 2020. The resulting equity value from the GPC method was allocated to common stock using the option pricing method, and a discount for lack of marketability was applied. Based on the above methodology and weightings, the Company derived a valuation conclusion of $2.20 and $2.30 per common share as of December 31, 2018 and September 30, 2018, respectively. The fair value the Company’s common stock is used as an input into the fair value determination of the warrants, stock option or other equity awards that the Company has issued or are outstanding liabilities at the reporting date. | Common Stock Valuation Due to the limited market liquidity for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (the “Practice Aid”), to estimate the fair value of its common stock. The valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, and the likelihood of achieving a liquidity event, such as an offering or sale. Significant changes to the key assumptions used in the valuations may result in different fair values of common stock at each valuation date. Following is a summary of underlying assumptions used: Prior to the Acquisition Prior to the Acquisition on July 20, 2017, NeuroOne was a private company with no active public market for its common stock. Therefore, at the time, NeuroOne determined the fair value of its common stock using a contemporaneous valuation performed in accordance with the Practice Aid. Within this contemporaneous valuation performed by NeuroOne included the following significant factors: ● recent securities transactions; ● stage of development and business strategy; ● the likelihood of a liquidity event such as an initial public offering, a merger or the sale of our company; ● financial condition and operating results, including our projected results; and ● financial condition and operating results of comparable publicly owned companies The fair value of NeuroOne’s common stock prior to the Acquisition was determined during a period when there was limited data with regard to value indication other than convertible notes issued between November 2016 and June 2017. At the time, such convertible notes contained a $1.80 conversion cap, which was treated as an estimated price of preferred stock into which the notes would convert. A transaction backsolve was performed that equated the $1.5 million investment in the convertible notes with the resulting equity allocation to the hypothetical converted shares and warrants expected to be issued upon conversion. The resulting equity value was then used to infer the value of common stock within the same option-pricing framework. This scenario implicitly assumed 100% likelihood of a stock financing. In order to account for the possibility of dissolution, the transaction backsolve was used along with a dissolution scenario within a hybrid Probability Weighted Expected Return Method (“PWERM”). The scenarios were weighted 50/50, and a Discount For Lack of Marketability (“DLOM”) applied, to determine the valuation conclusion. Following the Acquisition For valuations following the Acquisition, including the valuation of common stock on December 31, 2017, the Company estimated our enterprise value on a continuing operations basis, using the market approach, with certain adjustments relating to the thinly traded status of the Company. The traded price of the Company was deemed not to be an entirely reliable indication of fair market value given the lack of trading liquidity. Therefore, in addition to applying partial weighting to the traded price, the Company relied on forward revenue multiples from guideline public companies (“GPC”) for calendar year 2019 and 2020. The resulting equity value from the GPC method was allocated to common stock using the option pricing method, and a DLOM was applied. Based on the above methodology and weightings, the Company derived a valuation conclusion of $2.30 and $2.52 per share as of September 30, 2018 and December 31, 2017, respectively. The significant factors contributing to the increase in the fair value the Company’s common stock following the Acquisition included the following: ● The successful completion of the reverse merger; ● Access to new capital as a public company; ● Improved revenue projections; ● Improved general economic conditions; ● Additional issuance of convertible notes; and ● Important developments relating to achievement of our business objectives The fair value the Company’s common stock is used as an input into the fair value determination of the warrants, stock option or other equity awards that the Company has issued or are outstanding liabilities at the reporting date. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of December 31, 2018 and September 30, 2018, the fair values of cash, other assets, accounts payable, accrued expenses and the unsecured loans approximated their carrying values because of the short-term nature of these assets or liabilities. The estimated fair value of the convertible promissory notes of the Company was based on amortized cost which was deemed to approximate fair value. The fair value of the warrant liability and the premium conversion derivatives associated with the convertible promissory notes of the Company were based on both the estimated fair value of our common stock of $2.20 and $2.30 as of December 31, 2018 and September 30, 2018, respectively, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs. There were no transfers between fair value hierarchy levels during the three months ended December 31, 2018 and 2017. The fair value of financial instruments measured on a recurring basis is as follows: As of December 31, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 823,844 $ — $ — $ 823,844 Premium conversion derivatives 314,660 — — 314,660 Total liabilities at fair value $ 1,138,504 $ — $ — $ 1,138,504 As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 The following table provides a roll-forward of the warrant liability and premium debt conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the three month periods ended December 31, 2018 and 2017: 2018 2017 Warrant liability Balance as of beginning of period – September 30 $ 817,155 $ 774,172 Value assigned to warrants in connection with convertible promissory notes — 336,571 Change in fair value of warrant liability 6,689 270,722 Balance as of end of period – December 31 $ 823,844 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period – September 30 $ 308,395 $ 441,823 Value assigned to the underlying derivatives in connection with convertible promissory notes — 128,525 Change in fair value of premium debt conversion derivatives 6,265 (108,174 ) Balance as of end of period – December 31 $ 314,660 $ 462,174 | Fair Value of Financial Instruments The Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. As of September 30, 2018 and December 31, 2017, the fair values of cash, accounts payable, accrued expenses and the unsecured loans approximated their carrying values because of the short-term nature of these assets or liabilities. The estimated fair value of the short-term and convertible promissory notes of the Company was based on amortized cost which was deemed to approximate fair value. The fair value of the warrant liability and the premium conversion derivatives associated with the convertible promissory notes of the Company were based on both the estimated fair value of our common stock of $2.30 and $2.52 as of September 30, 2018 and December 31, 2017, respectively, and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and are based on Level 3 inputs. There were no transfers between fair value hierarchy levels during the nine month transition period ended September 30, 2018 or for the year ended December 31, 2017. The fair value of financial instruments measured on a recurring basis is as follows: As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 As of December 31, 2017 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 1,381,465 $ — $ — $ 1,381,465 Premium conversion derivatives 462,174 — — 462,174 Total liabilities at fair value $ 1,843,639 $ — $ — $ 1,843,639 The following table provides a roll-forward of the warrant liability and premium debt conversion derivatives measured at fair value on a recurring basis using unobservable level 3 inputs for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017: 2018 2017 Warrant liability Balance as of beginning of period $ 1,381,465 $ 345,960 Value assigned to warrants in connection with convertible promissory and short-term notes 579,873 777,490 Reclassification to equity (1,179,418 ) — Change in fair value of warrant liability 35,235 258,015 Balance as of end of period $ 817,155 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period $ 462,174 $ 137,650 Value assigned to the underlying derivatives in connection with convertible promissory and short-term notes 218,052 342,486 Change in fair value of premium debt conversion derivatives (371,831 ) (17,962 ) Balance as of end of period $ 308,395 $ 462,174 |
Intellectual Property | Intellectual Property The Company has entered into two licensing agreements with major research institutions, which allows for access to certain patented technology and know-how. Payments under those agreements are capitalized and amortized to general and administrative expense over the expected useful life of the acquired technology. | Intellectual Property The Company has entered into two licensing agreements with major research institutions, which allows for access to certain patented technology and know-how. Payments under those agreements are capitalized and amortized to general and administrative expense over the expected useful life of the acquired technology. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consists entirely of licensed intellectual property for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Through December 31, 2018, the Company has not impaired any long-lived assets. | Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consists entirely of licensed intellectual property for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Through September 30, 2018, no milestones triggering possible impairment of the Company’s long-lived assets have occurred. |
Debt Issuance Costs | Debt Issuance Costs Debt issuance costs are recorded as a reduction of the convertible promissory notes when applicable. Amortization of debt issuance costs is calculated using the straight-line method over the term of the convertible promissory notes, which approximates the effective interest method, and is recorded in interest expense in the accompanying condensed consolidated statements of operations. | Debt Issuance Costs Debt issuance costs are recorded as a reduction of the convertible promissory notes and short-term notes when applicable. Amortization of debt issuance costs is calculated using the straight-line method over the term of the convertible promissory notes, which approximates the effective interest method, and is recorded in interest expense in the accompanying consolidated statements of operations. |
Research and Development Costs | Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses may include costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials as well as other contracted services, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with ASC 730, Research and Development | Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses may comprise of costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials as well as other contracted services, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with ASC 730, Research and Development |
Warrant Liability | Warrant Liability The Company issued warrants to purchase equity securities in connection with the issuance or amendment of the convertible promissory notes. The Company accounts for these warrants as a liability at fair value when the number of shares is not fixed and determinable in cases where warrant pricing protections in future equity financings are not available to other common stockholders. Additionally, issuance costs associated with the warrant liability are expensed as incurred and reflected as interest expense in the accompanying condensed consolidated statements of operations. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants for any period when pricing protections in future equity financings remain in place, or until such time, if any, as the number of shares to be exercised becomes fixed, at which point the warrants will be classified in stockholders’ (deficit) equity provided that there are sufficient authorized and unissued shares of common stock to settle the warrants and redeem any other contracts that may require settlement in shares of common stock. Any future change in fair value of the warrant liability, when outstanding, is recognized in the condensed consolidated statements of operations. | Warrant Liability The Company issued warrants to purchase equity securities in connection with the issuance of convertible promissory notes (See Note 7– Short-Term Promissory Notes and Unsecured Loans and Note 8 – Convertible Promissory Notes and Warrant Agreements). The Company accounts for these warrants as a liability at fair value when the number of shares is not fixed and determinable in cases where warrant pricing protections in future equity financings are not available to other common stockholders. Additionally, issuance costs associated with the warrant liability are expensed as incurred and reflected as interest expense in the accompanying consolidated statements of operations. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants for any period when pricing protections in future equity financings remain in place, or until such time, if any, as the number of shares to be exercised becomes fixed, at which point the warrants will be classified in stockholders’ (deficit) equity provided that there are sufficient authorized and unissued shares of common stock to settle the warrants and redeem any other contracts that may require settlement in shares of common stock. Any future change in fair value of the warrant liability, when outstanding, is recognized in the consolidated statements of operations. |
Premium Debt Conversion Derivatives | Premium Debt Conversion Derivatives The Company evaluates all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivative is accounted for separately on a fair market value basis. The Company records the fair value changes of a separated embedded derivative at each reporting period in the condensed consolidated statements of operations. The Company determined that the redemption features under the convertible promissory notes qualified as embedded derivatives and were separated from their debt hosts. | Premium Debt Conversion Derivatives The Company evaluates all conversion and redemption features contained in a debt instrument to determine if there are any embedded derivatives that require separation from the host debt instrument. An embedded derivative that requires separation is bifurcated from its host debt instrument and a corresponding discount to the host debt instrument is recorded. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the straight-line method which approximates the effective interest method. The separated embedded derivatives are accounted for separately on a fair value basis. The Company records the fair value changes of separated embedded derivatives at each reporting period in the consolidated statements of operations (See Note 7– Short-Term Promissory Notes and Unsecured Loans and Note 8 – Convertible Promissory Notes and Warrant Agreements). The Company determined that the redemption features under the convertible promissory notes qualified as embedded derivatives and therefore separated from the debt host with regard to the convertible promissory notes. |
Income Taxes | Income Taxes For the Company, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. | Income Taxes For the Company, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion of all of the deferred tax asset will not be realized. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law making significant changes to the U.S. tax code. Changes affecting the Company’s consolidated financial statements include, but are not limited to, a U.S federal corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. The Company has adjusted the disclosure amounts related to deferred tax assets and the valuation allowance recorded to reflect the new federal corporate tax rates. |
Net Loss Per Share | Net Loss Per Share For the Company, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s convertible promissory notes, warrants, and stock options while outstanding are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants and stock options. Diluted earnings with respect to the convertible promissory notes utilizing the if-converted method was not applicable during the three month periods ended December 31, 2018 and 2017 as no conditions required for conversion had occurred during these periods. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the three month periods ended December 31, 2018 and 2017. The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three month periods ended December 31, 2018 and 2017: 2018 2017 Warrants 3,257,572 (1) 189,750 (1) Stock options 543,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million or a change of control transaction occurs in the future. | Net Loss Per Share For the Company, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s convertible promissory notes, warrants and stock options are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants and stock options. Diluted earnings with respect to the convertible promissory notes utilizing the if-converted method was not applicable during the nine month transition period ended September 30, 2018 or for the year ended December 31, 2017 as no conditions required for conversion had occurred during these periods. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017. The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the nine month transition period ended September 30, 2018 and for the year ended December 31, 2017: 2018 2017 Warrants 2,927,572 (1) 189,750 (1) Stock options 368,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million occurs in the future related to the 2017 Convertible Notes. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , Revenue from Contracts with Customers . In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ● Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ● Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. ● Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of the new guidance on its financial statements. | Recent Accounting Pronouncements In May 2017, the FASB issued Accounting Standards Update (ASU) 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2016-09) In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity and Derivatives and Hedging In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , Revenue from Contracts with Customers . In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ● Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ● Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. ● Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of the new guidance on its financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||
Schedule of fair value of financial instruments measured on a recurring basis | As of December 31, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 823,844 $ — $ — $ 823,844 Premium conversion derivatives 314,660 — — 314,660 Total liabilities at fair value $ 1,138,504 $ — $ — $ 1,138,504 As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 | As of September 30, 2018 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 817,155 $ — $ — $ 817,155 Premium conversion derivatives 308,395 — — 308,395 Total liabilities at fair value $ 1,125,550 $ — $ — $ 1,125,550 As of December 31, 2017 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 1,381,465 $ — $ — $ 1,381,465 Premium conversion derivatives 462,174 — — 462,174 Total liabilities at fair value $ 1,843,639 $ — $ — $ 1,843,639 |
Schedule of warrant liability and premium debt conversion derivatives measured at fair value on a recurring basis | 2018 2017 Warrant liability Balance as of beginning of period – September 30 $ 817,155 $ 774,172 Value assigned to warrants in connection with convertible promissory notes — 336,571 Change in fair value of warrant liability 6,689 270,722 Balance as of end of period – December 31 $ 823,844 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period – September 30 $ 308,395 $ 441,823 Value assigned to the underlying derivatives in connection with convertible promissory notes — 128,525 Change in fair value of premium debt conversion derivatives 6,265 (108,174 ) Balance as of end of period – December 31 $ 314,660 $ 462,174 | 2018 2017 Warrant liability Balance as of beginning of period $ 1,381,465 $ 345,960 Value assigned to warrants in connection with convertible promissory and short-term notes 579,873 777,490 Reclassification to equity (1,179,418 ) — Change in fair value of warrant liability 35,235 258,015 Balance as of end of period $ 817,155 $ 1,381,465 2018 2017 Premium debt conversion derivatives Balance as of beginning of period $ 462,174 $ 137,650 Value assigned to the underlying derivatives in connection with convertible promissory and short-term notes 218,052 342,486 Change in fair value of premium debt conversion derivatives (371,831 ) (17,962 ) Balance as of end of period $ 308,395 $ 462,174 |
Schedule of computation of diluted net loss per share | 2018 2017 Warrants 3,257,572 (1) 189,750 (1) Stock options 543,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million or a change of control transaction occurs in the future. | 2018 2017 Warrants 2,927,572 (1) 189,750 (1) Stock options 368,216 365,716 (1) There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million occurs in the future related to the 2017 Convertible Notes. |
Intangibles (Tables)
Intangibles (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Schedule of intangible assets | Useful Life Net Intangibles, September 30, 2018 12-13 Years $ 200,081 Less: amortization (5,311 ) Net Intangibles, December 31, 2018 $ 194,770 | Useful Life Net Intangibles, December 31, 2016 12-13 years $ 180,890 License agreement amendment 53,115 Less: amortization (17,633 ) Net Intangibles, December 31, 2017 216,372 Less: amortization (16,291 ) Net Intangibles, September 30, 2018 $ 200,081 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Payables and Accruals [Abstract] | ||
Schedule of accrued expenses | December 31, 2018 September 30, 2018 License fees $ 65,000 $ 65,000 Legal services 848,708 833,470 Accrued issuance costs 229,201 204,000 Accrued payroll 316,350 276,639 Advances 40,000 — Other 241,634 211,913 $ 1,740,893 $ 1,591,022 | 2018 2017 Accrued license fees $ 65,000 $ 120,000 Legal costs 833,470 553,037 Accrued issuance costs 204,000 28,083 Accrued payroll 276,639 223,195 Advances — 50,000 Other 211,913 47,302 $ 1,591,022 $ 1,021,617 |
Short-Term Promissory Notes a_2
Short-Term Promissory Notes and Unsecured Loan (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of short-term promissory notes, unsecured loans | As of As of Short-term promissory notes $ — $ 253,000 Unsecured loans $ 283,000 $ — |
Convertible Promissory Notes _2
Convertible Promissory Notes and Warrant Agreements (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Debt Disclosure [Abstract] | ||
Schedule of convertible promissory notes and warrant agreements | As of December 31, As of 2017 convertible promissory notes, net of discounts $ 1,540,000 $ 1,306,776 Accrued interest 117,828 87,028 $ 1,657,828 $ 1,393,804 | As of As of 2016 convertible promissory notes, net of discounts $ — $ 1,543,652 2017 convertible promissory notes, net of discounts 1,306,776 504,465 Accrued interest 87,028 120,223 Total $ 1,393,804 $ 2,168,340 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Offsetting Assets [Line Items] | ||
Schedule of stock-based services expense | 2018 2017 General and administrative $ 480,653 $ 2,065 Research and development 5,467 74,729 Total stock-based services expense $ 486,120 $ 76,794 | |
Schedule of stock option plan activity | Weighted- Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Options Price Term (years) Value(1) Outstanding at December 31, 2016 — — — — Granted 365,716 $ 0.03 — — Exercised — — — — Forfeited/Cancelled — — — — Outstanding at December 31, 2017 365,716 $ 0.03 9.3 $ 908,920 Granted 2,500 $ 5.34 — — Exercised — — — — Forfeited/Cancelled — — — — Outstanding at September 30, 2018 368,216 $ 0.07 8.6 $ 820,862 Vested and exercisable at September 30, 2018 368,216 $ 0.07 8.6 $ 820,862 (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of our common stock as of September 30, 2018 and December 31, 2017 of $2.30 and $2.52 per share, respectively. | |
Schedule of weighted-average assumptions used Black-Scholes option-pricing model | 2018 2017 Expected stock price volatility 49.8 % 47.8 % Expected life of options (years) 5.0 5.0 Expected dividend yield 0 % 0 % Risk free interest rate 2.8 % 1.9 % | |
Stock options [Member] | ||
Offsetting Assets [Line Items] | ||
Schedule of weighted-average assumptions used Black-Scholes option-pricing model | 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5.8 Expected dividend yield 0 % Risk free interest rate 2.8 % | 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5.0 Expected dividend yield 0 % Risk free interest rate 2.9 % |
Stock- option liability [Member] | ||
Offsetting Assets [Line Items] | ||
Schedule of weighted-average assumptions used Black-Scholes option-pricing model | 2018 Expected stock price volatility 49.8 % Expected life of options (years) 5 Expected dividend yield 0 % Risk free interest rate 2.5 % |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of reconciliation of income tax computed at the statutory federal income tax rate | 2018 2017 Income tax benefit at federal statutory rate (21.0 )% (34.0 )% State income tax, net of federal benefit (7.7 ) (6.5 ) Warrant expense 9.4 10.6 Disqualified interest and other 1.0 0.9 Research credits (1.5 ) (1.2 ) U.S. tax reform — 8.3 Valuation allowance 19.8 21.9 Effective tax rate — % — % |
Schedule of deferred tax assets and liabilities | 2018 2017 Deferred tax assets: Federal and state operating loss carryforwards $ 1,837,375 $ 871,371 Acquired intangibles 10,116 5,433 Accruals 73,763 64,151 Convertible notes 28,863 81,904 Research and development credit carryforwards 140,553 63,197 Stock-based compensation 24,598 19,821 Total deferred tax assets 2,115,268 1,105,877 Valuation allowance (2,115,268 ) (1,105,877 ) Net deferred tax assets $ — $ — |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | ||
Summary of warrant activity | Exercise Weighted Average Warrants Per Exercise Outstanding and exercisable at September 30, 2018 2,927,572 $ 1.80 - 3.00 $ 1.98 Issued 330,000 $ 3.00 $ 3.00 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at December 31, 2018 3,257,572 $ 1.80 - $3.00 $ 2.09 | Exercise Price Weighted Average Warrants Per Warrant Exercise Price Outstanding at January 1, 2017 — $ — $ — Issued 189,750 $ 1.80 $ 1.80 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at December 31, 2017 189,750 $ 1.80 $ 1.80 Issued 2,737,822 $1.80 - 3.00 $ 2.00 Exercised — $ — $ — Forfeited — $ — $ — Outstanding and exercisable at September 30, 2018 2,927,572 $1.80 - 3.00 $ 1.98 |
Summary of information about warrants outstanding | Exercise Price Number Outstanding Weighted Average Remaining Contractual life (Years) Number Exercisable at September 30, 2018 $ 1.80 2,482,372 3.1 2,482,372 $ 3.00 445,200 4.8 445,200 Total 2,927,572 2,927,572 |
Organization and Nature of Oper
Organization and Nature of Operations (Details) | 1 Months Ended | 9 Months Ended | |
Jul. 20, 2017$ / sharesshares | Sep. 30, 2018 | Feb. 28, 2018shares | |
Organization and Nature of Operations (Textual) | |||
Common stock, ownership percentage | 100.00% | ||
Par value of company's common stock issued in lieu of exchange | $ / shares | $ 0.001 | ||
Aggregate shares issued of the then-outstanding NeuroOne shares | 3,500,000 | ||
Reserve related future issuance of shares associated with the stock award | 250,000 | ||
NeuroOne, Inc. [Member] | |||
Organization and Nature of Operations (Textual) | |||
Common stock, ownership percentage | 100.00% | ||
Conversation of stock, description | NeuroOne Medical Technologies Corporation, increased its authorized number of shares of common stock from 45,000,000 to 100,000,000, increased its authorized number of shares of preferred stock from 5,000,000 to 10,000,000 and reincorporated in Delaware. | ||
Par value of company's common stock issued in lieu of exchange | $ / shares | $ 0.0001 | ||
Common shares exchange ratio | 17.0103706 | ||
Aggregate shares issued of the then-outstanding NeuroOne shares | 6,291,994 | ||
Reserve related future issuance of shares associated with the stock award | 992,265 | ||
Tendered for cancellation of shares | 3,500,000 |
Going Concern (Details)
Going Concern (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jul. 31, 2018 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Going Concern (Textual) | ||||
Accumulated deficit | $ (11,810,534) | $ (10,457,710) | $ (5,324,796) | |
Unsecured loan | 528,000 | 283,000 | ||
Short-term promissory note | 253,000 | 253,000 | ||
Convertible promissory note financing | 1,625,120 | 1,625,120 | ||
Second convertible promissory note financing | 1,540,000 | 1,540,000 | ||
Convertible promissory note, subscription | 2,500,000 | |||
Convertible promissory note, subscription one | 2,000,000 | |||
Gross proceeds were raised out | $ 1,113,000 | 1,900,000 | ||
Maximum subscription amount | $ 10,000,000 | $ 11,800,000 | ||
Convertible Notes Payable [Member] | ||||
Going Concern (Textual) | ||||
Gross proceeds of equity qualified financing | $ 3,000,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Liabilities: | |||
Warrant liability | $ 823,844 | $ 817,155 | $ 1,381,465 |
Premium conversion derivatives | 314,660 | 308,395 | 462,174 |
Total liabilities at fair value | 1,138,504 | 1,125,550 | 1,843,639 |
Level 3 [Member] | |||
Liabilities: | |||
Warrant liability | 823,844 | 817,155 | 1,381,465 |
Premium conversion derivatives | 314,660 | 308,395 | 462,174 |
Total liabilities at fair value | 1,138,504 | 1,125,550 | 1,843,639 |
Level 1 [Member] | |||
Liabilities: | |||
Warrant liability | |||
Premium conversion derivatives | |||
Total liabilities at fair value | |||
Level 2 [Member] | |||
Liabilities: | |||
Warrant liability | |||
Premium conversion derivatives | |||
Total liabilities at fair value |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - Warrant [Member] - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Schedule of warrant liability [Abstract] | ||||
Balance as of beginning of period | $ 817,155 | $ 774,172 | $ 1,381,465 | $ 345,960 |
Value assigned to warrants in connection with convertible promissory and short-term notes | 336,571 | 579,873 | 777,490 | |
Reclassification to equity | (1,179,418) | |||
Change in fair value of warrant liability | 6,689 | 270,722 | 35,235 | 258,015 |
Balance as of end of period | $ 823,844 | $ 1,381,465 | $ 817,155 | $ 1,381,465 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - Debt Conversion Derivative [Member] - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Schedule of Premium debt conversion derivative [Abstract] | ||||
Balance as of beginning of period | $ 308,395 | $ 441,823 | $ 462,174 | $ 137,650 |
Value assigned to the underlying derivatives in connection with convertible promissory and short-term notes | 128,525 | 218,052 | 342,486 | |
Change in fair value of premium debt conversion derivatives | 6,265 | (108,174) | (371,831) | (17,962) |
Balance as of end of period | $ 314,660 | $ 462,174 | $ 308,395 | $ 462,174 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details 3) - shares | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |||||
Stock options [Member] | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Anti-dilutive computation of diluted net loss per share | 543,216 | 365,716 | 368,216 | 365,716 | ||||
Warrants [Member] | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Anti-dilutive computation of diluted net loss per share | 3,257,572 | [1] | 189,750 | [1] | 2,927,572 | [2] | 189,750 | [2] |
[1] | There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million or a change of control transaction occurs in the future. | |||||||
[2] | There are additional potential warrants to be included which will be known, if and when a qualified financing event greater than $3 million occurs in the future related to the 2017 Convertible Notes. |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details Textual) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2018USD ($)Agreements$ / shares | Sep. 30, 2018USD ($)Agreements$ / shares | Dec. 31, 2017$ / shares | |
Summary of Significant Accounting Policies (Textual) | |||
Estimated fair value of our common stock | $ / shares | $ 2.20 | $ 2.30 | $ 2.52 |
Additional potential warrants | $ 3,000,000 | $ 3,000,000 | |
Number of licencing agreements | Agreements | 2 | 2 | |
Convertible estimated price per share | $ / shares | $ 1.80 | ||
Investment on convertible notes | $ 1,500,000 | ||
Federally insured amounts | $ 134,109 | ||
U.S federal corporate tax rate, description | U.S federal corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. | ||
Percentage of stock financing | 100.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Apr. 30, 2018 | Oct. 27, 2016 | Dec. 31, 2017 | Sep. 30, 2018 | |
Commitments and Contingencies (Textual) | ||||
Value of share issued as royalty upon the achievement of milestone | $ 23,415 | |||
Mayo Agreement [Member] | ||||
Commitments and Contingencies (Textual) | ||||
Expiry date | May 25, 2037 | |||
Value of share issued as royalty upon the achievement of milestone | $ 300 | |||
Milestone amount recorded for intellectual property | $ 91,709 | |||
Milestone payments paid | $ 91,709 | |||
Percentage of unpaid accrued interest | 2.00% | |||
Common stock shares issued | 859,976 | |||
Additional amount of intangible assets | $ 23,115 | |||
WARF License Agreement [Member] | ||||
Commitments and Contingencies (Textual) | ||||
Milestone payments in connection with WARF License Agreement | $ 55,000 | $ 110,000 | 55,000 | |
Estimated fair value of intangible asset | $ 120,000 | |||
Cummulative financing triggers payment | 3,000,000 | |||
Minimum royalties for the year 2019 | 50,000 | |||
Minimum royalties for the year 2020 | 100,000 | |||
Royalties per year beginning from 2021 | $ 150,000 | |||
Expiry date | Dec. 31, 2030 | |||
Cost incurred maintaining licensed patents | $ 65,000 | |||
Additional cummulative financing triggers payment | $ 5,000,000 | |||
Milestone payments paid | $ 65,000 | |||
Percentage of unpaid accrued interest | 1.00% |
Intangibles (Details)
Intangibles (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Schedule of Intangible Assets [Abstract] | |||
Net Intangibles, Beginning Balance | $ 200,081 | $ 216,372 | $ 180,890 |
License agreement amendment | 53,115 | ||
Less: amortization | (5,311) | (16,291) | (17,633) |
Net Intangibles, Ending Balance | $ 194,770 | $ 200,081 | $ 216,372 |
Maximum [Member] | |||
Schedule of Intangible Assets [Abstract] | |||
Net Intangibles, Useful Life | 13 years | 13 years | |
Minimum [Member] | |||
Schedule of Intangible Assets [Abstract] | |||
Net Intangibles, Useful Life | 12 years | 12 years |
Intangibles (Details Textual)
Intangibles (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Intangibles (Textual) | |||||
Amortization expense, description | Approximately $21,000 per year for fiscal year 2019 through 2023 based upon the two current license agreements. | ||||
Amortization expense | $ 5,311 | $ 4,265 | $ 16,291 | $ 13,368 | $ 17,633 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | |||
License fees | $ 65,000 | $ 65,000 | $ 120,000 |
Legal services | 848,708 | 833,470 | 553,037 |
Accrued issuance costs | 229,201 | 204,000 | 28,083 |
Accrued payroll | 316,350 | 276,639 | 223,195 |
Advances | 40,000 | 50,000 | |
Other | 241,634 | 211,913 | 47,302 |
Total accrued expenses | $ 1,740,893 | $ 1,591,022 | $ 1,021,617 |
Short-Term Promissory Notes a_3
Short-Term Promissory Notes and Unsecured Loan (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | |||
Short-term promissory notes | $ 253,000 | ||
Unsecured loans | $ 528,000 | $ 283,000 |
Short-Term Promissory Notes a_4
Short-Term Promissory Notes and Unsecured Loan (Details Textual) - USD ($) | Mar. 20, 2018 | Mar. 12, 2018 | Nov. 30, 2018 | Jul. 02, 2018 | May 17, 2018 | Nov. 30, 2017 | Nov. 30, 2017 | Aug. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Aggregate gross proceeds of short-term unsecured promissory notes | $ (3,030) | $ (3,030) | |||||||||||
Initial warrant liability changes | 61,496 | ||||||||||||
Fair value of warrants risk-free interest rate | 2.65% | ||||||||||||
Fair value of warrants expected volatility | 50.00% | ||||||||||||
Fair value of warrants expected life | 3 years 4 months 20 days | ||||||||||||
Fair value of warrants expected dividend yield | 0.00% | ||||||||||||
Short-term unsecured loan | $ 528,000 | $ 283,000 | |||||||||||
Warrants expiration date | Nov. 21, 2021 | ||||||||||||
Loss on short-term notes extinguishment | 137,722 | ||||||||||||
Other Liabilities | |||||||||||||
Warrants exercisable, description | The holder the option to purchase up to the number of shares of capital stock of the Company equal to the product obtained by multiplying (i) the outstanding principal amount of the Amended and Restated Short-Term Note held by such holder and (ii) 0.75; at a per share exercise price of $1.80. | ||||||||||||
Adjustment to account for change in valuation | $ 22,624 | ||||||||||||
Amortization charged to interest expense related to issuance costs | 233,223 | 298,605 | 611,020 | 943,427 | 1,242,031 | ||||||||
Warrant liability | 823,844 | 1,381,465 | 817,155 | 1,381,465 | |||||||||
Operating expenses | $ 1,075,847 | 773,784 | $ 3,391,958 | $ 2,298,539 | 3,072,321 | ||||||||
Activity Prior to the July 2, 2018 Cancellation, Extinguishment and Conversion of the Short-Term Notes [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Aggregate gross proceeds of short-term unsecured promissory notes | $ 253,000 | ||||||||||||
Issuance costs discounted of short-term unsecured promissory notes | 3,030 | ||||||||||||
Short-term payment warrants | $ 61,496 | ||||||||||||
Common stock purchase warrants | 126,500 | ||||||||||||
Fair value of warrants risk-free interest rate | 2.10% | ||||||||||||
Fair value of warrants expected volatility | 47.80% | ||||||||||||
Fair value of warrants expected life | 5 years 8 months 12 days | ||||||||||||
Fair value of warrants expected dividend yield | 0.00% | ||||||||||||
Loss on short-term notes extinguishment | $ 144,577 | ||||||||||||
Convertible notes bear interest at fixed rate | |||||||||||||
Short-term notes conversion, description | The Short-Term Notes were amended to extend the maturity date from February 18, 2018 to July 31, 2018 and to increase warrant coverage to 189,750 common stock purchase warrants (as amended, the "Original Warrants"). The Original Warrants had a term of 5 years and an exercise price of $1.80 and would have been immediately exercisable upon maturity of the Short-Term Notes prior to the November 30, 2017 amendment. | ||||||||||||
Amortization charged to interest expense related to issuance costs | $ 1,748 | 35,479 | |||||||||||
Issuance of additional warrants in connection with short term notes | $ 117,280 | ||||||||||||
Short-Term Promissory Notes [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Aggregate gross proceeds of short-term unsecured promissory notes | $ 253,000 | ||||||||||||
Short-term debt, description | (i) convert the outstanding principal and accrued and unpaid interest (the "Outstanding Balance") under the Short-Term Notes into shares of the Company's common stock based on the Outstanding Balance divided by $1.80 per share (the "Short-Term Note Conversion Shares"); (ii) cancel and extinguish the Short-Term Notes; and (iii) amend and restate the Replacement Warrants and Additional Warrants, as described more fully below, to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Short-Term Notes, the Company issued each subscriber a new warrant (the "Short-Term Note Payment Warrants"), exercisable for up to the number of shares of common stock equal to the number of Short-Term Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. | ||||||||||||
Converted into shares of common stock | 144,053 | ||||||||||||
Shares of common stock issuable upon exercise | 477,856 | ||||||||||||
Short-term payment warrants | $ 148,787 | ||||||||||||
Fair value of warrants risk-free interest rate | 2.65% | ||||||||||||
Fair value of warrants expected volatility | 49.80% | ||||||||||||
Fair value of warrants expected life | 3 years 4 months 20 days | ||||||||||||
Fair value of warrants expected dividend yield | 0.00% | ||||||||||||
Additional warrants allocated | $ 189,750 | ||||||||||||
Warrants expiration date | Nov. 21, 2021 | ||||||||||||
Loss on short-term notes extinguishment | $ 148,787 | ||||||||||||
Convertible notes bear interest at fixed rate | 8.00% | ||||||||||||
Outstanding principal | 259,297 | ||||||||||||
Warrant liability | 148,053 | ||||||||||||
Premium Conversion Derivative [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Value of premium conversion derivative | 49,668 | ||||||||||||
Fair value changes of warrant liability | $ (49,668) | ||||||||||||
Short-term notes conversion, description | The Amended and Restated Short-Term Notes contained a 125% conversion premium in the event that a Short Term Note Qualified Financing occurred at a price under $2.25 per share. | ||||||||||||
Operating expenses | $ 10,330 | ||||||||||||
Other Debt [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Loss on short-term notes extinguishment | 186,220 | ||||||||||||
Adjustment to account for change in valuation | $ 1,170 | ||||||||||||
November 2017 amendment [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Loss on short-term notes extinguishment | 144,577 | ||||||||||||
Issuance of additional warrants in connection with short term notes | 117,280 | ||||||||||||
Equity warrants and issuance costs | $ 21,627 | $ 21,627 | |||||||||||
Unsecured Loan [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Short-term unsecured promissory notes maturity date | Mar. 20, 2019 | May 17, 2019 | |||||||||||
Gross proceeds upon equity qualified financing | $ 115,000 | $ 168,000 | |||||||||||
Gross proceeds from unsecured loan | $ 3,000,000 | $ 5,000,000 | |||||||||||
Unsecured Loan [Member] | Unsecured Loan [Member] | Two promissory notes [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Short-term unsecured promissory notes maturity date | May 17, 2019 | ||||||||||||
Gross proceeds upon equity qualified financing | $ 5,000,000 | ||||||||||||
Gross proceeds from unsecured loan | 45,000 | ||||||||||||
Amount of stockholder owning | $ 100,000 | ||||||||||||
Stockholder ownership percentage | 5.00% | ||||||||||||
Unsecured Loan [Member] | Unsecured Loan [Member] | One promissory note [Member] | |||||||||||||
Short-Term Promissory Notes and Unsecured Loan (Textual) | |||||||||||||
Short-term unsecured promissory notes maturity date | Dec. 12, 2019 | ||||||||||||
Gross proceeds upon equity qualified financing | $ 5,000,000 | ||||||||||||
Gross proceeds from unsecured loan | $ 100,000 | ||||||||||||
Stockholder ownership percentage | 5.00% |
Convertible Promissory Notes _3
Convertible Promissory Notes and Warrant Agreements (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Short-term Debt [Line Items] | |||
Accrued interest | $ 117,828 | $ 87,028 | $ 120,223 |
Convertible promissory notes, net | 1,657,828 | 1,393,804 | 2,168,340 |
2017 convertible promissory notes, net of discounts [Member] | |||
Short-term Debt [Line Items] | |||
Convertible promissory notes, net | $ 1,540,000 | 1,306,776 | 504,465 |
2016 convertible promissory notes, net of discounts [Member] | |||
Short-term Debt [Line Items] | |||
Convertible promissory notes, net | $ 1,543,652 |
Convertible Promissory Notes _4
Convertible Promissory Notes and Warrant Agreements (Details Textual) - USD ($) | Nov. 20, 2017 | Oct. 04, 2017 | Jul. 02, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | May 31, 2018 | Nov. 30, 2017 | Jun. 30, 2017 |
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Fair value of warrants risk-free interest rate | 2.65% | |||||||||||
Fair value of warrants expected volatility | 50.00% | |||||||||||
Fair value of warrants expected life | 3 years 4 months 20 days | |||||||||||
Fair value of warrants expected dividend yield | 0.00% | |||||||||||
Amortization expense | $ 340,551 | |||||||||||
Loss on convertible notes extinguishment | $ (350,914) | $ (1,314,487) | (350,914) | |||||||||
Bifurcation of premium conversion derivatives related to convertible promissory notes | 128,525 | 168,384 | $ 213,961 | $ 342,486 | ||||||||
Private Placement [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Cost of issuance | $ 59,694 | $ 173,067 | ||||||||||
New Warrants [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Fair value of warrants risk-free interest rate | 2.52% | 2.94% | 2.22% | |||||||||
Fair value of warrants expected volatility | 50.00% | 50.00% | 50.00% | |||||||||
Fair value of warrants expected life | 5 years 2 months 30 days | 5 years 2 months 16 days | 5 years 4 months 17 days | |||||||||
Fair value of warrants expected dividend yield | 0.00% | 0.00% | 0.00% | |||||||||
Convertible promissory note proceeds assigned to warrants | $ 442,151 | $ 336,571 | ||||||||||
Amortization expense | 375,076 | 9,971 | ||||||||||
Fair value changes of warrant liability | 39,770 | (1,337) | ||||||||||
2017 Convertible Notes [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Convertible notes bear interest at fixed rate | 8.00% | |||||||||||
Principal amount | $ 1,540,000 | |||||||||||
Description of subscription agreement with certain investors | Extend the maturity date from December 31, 2018 to June 30, 2019. | |||||||||||
Gross proceeds of equity qualified financing | $ 3,000,000 | |||||||||||
Description of outstanding principal and accrued interest | If the Company consummates an equity round of financing resulting in more than $3 million in gross proceeds before June 30, 2019 (the "2017 Convertible Notes Qualified Financing"), the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes shall automatically convert into the securities issued by the Company in the 2017 Convertible Notes Qualified Financing equal to the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. | |||||||||||
Subscription agreement limit 2017 convertible notes | 1,500,000 | |||||||||||
Loss on convertible notes extinguishment | 303,560 | |||||||||||
Bifurcation of premium conversion derivatives related to convertible promissory notes | 168,384 | 128,525 | ||||||||||
Fair value changes on premium debt conversion derivative | (333,183) | (18,428) | ||||||||||
2017 Convertible Notes [Member] | Private Placement [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Amortization expense | 143,166 | $ 62,158 | 3,815 | |||||||||
Fair value changes on premium debt conversion derivative | 11,020 | $ 6,265 | 466 | |||||||||
2017 Convertible Notes [Member] | New Warrants [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Amortization of discount to convertible notes | $ 1,431 | 2,944 | $ 157 | |||||||||
Cost of issuance | $ 8,133 | |||||||||||
2016 Convertible Promissory Notes [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Convertible notes bear interest at fixed rate | 8.00% | |||||||||||
Repay principal and accrued and unpaid interest earlier | Jul. 31, 2018 | |||||||||||
Gross proceeds of equity qualified financing | $ 3,000,000 | |||||||||||
Description of outstanding principal and accrued interest | If a Qualified Financing had occurred before July 31, 2018, the outstanding principal and accrued and unpaid interest on the Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of securities resulting from either the outstanding principal and accrued interest on the Convertible Notes divided by $1.80, or the outstanding principal and accrued interest on the Convertible Notes multiplied by 1.25, divided by the price paid per security in the Qualified Financing. If the Company failed to complete a Qualified Financing by July 31, 2018, the Convertible Notes would have been immediately due and payable on such date. | |||||||||||
Description of maximum voting power of surviving entity | Change of control means a merger or consolidation with another entity in which the Company's stockholders do not own more than 50 percent of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the assets of the Company. | |||||||||||
Amount of convertible note held by warrant holder | $ 1.80 | |||||||||||
Warrants exercisable date of issuance and expire | Nov. 21, 2021 | |||||||||||
Fair value of warrants risk-free interest rate | 2.65% | 2.08% | ||||||||||
Fair value of warrants expected volatility | 49.80% | 50.00% | ||||||||||
Fair value of warrants expected life | 3 years 4 months 20 days | 3 years 10 months 21 days | ||||||||||
Fair value of warrants expected dividend yield | 0.00% | 0.00% | ||||||||||
Convertible promissory note proceeds assigned to warrants | $ 0 | $ 440,919 | ||||||||||
Amortization expense | 759,004 | |||||||||||
Convertible notes conversion premium | 125.00% | |||||||||||
Convertible notes conversion price per common share | $ 2.25 | |||||||||||
Amortization of discount to convertible notes | $ 0 | 213,961 | ||||||||||
Debt issuance cost discount | 979,480 | |||||||||||
Loss on convertible notes extinguishment | $ 11,143 | |||||||||||
Fair value changes of warrant liability | (14,865) | 259,352 | ||||||||||
Conversion agreements, description | (i) convert the Outstanding Balance under the Convertible Notes into shares of the Company?s common stock based on the Outstanding Balance divided by $1.80 per share (the ?2016 Note Conversion Shares?); (ii) cancel and extinguish the Convertible Notes; and (iii) amend and restate the Warrants to make them immediately exercisable upon the conversion, at a per share exercise price equal to $1.80 per share. As consideration for the early conversion of the Convertible Notes, the Company issued each subscriber an additional new warrant (the ?2016 Note Payment Warrants?), exercisable for up to the number of shares of common stock equal to the number of 2016 Note Conversion Shares received by such subscriber; at a per share exercise price of $1.80 per share. | |||||||||||
Outstanding principal | $ 1,804,064 | $ 1,625,120 | ||||||||||
Convertible promissory notes converted into common stock | 1,002,258 | |||||||||||
Shares of common stock issuable upon exercise of warrants | 2,004,516 | |||||||||||
Note payment warrants issued | $ 979,480 | |||||||||||
Warrant liability value of reclassified to equity | 1,031,366 | |||||||||||
Interest on principal amount | 32,502 | |||||||||||
Interest related to amortization of discounts related to bifurcation of premium derivative liability, separation of warrants, revaluation discounts and issuance costs amount | 261,749 | |||||||||||
Fair value changes related to underlying premium conversion derivative and warrant liability amounted to benefit | (108,641) | |||||||||||
Fair value changes related to underlying premium conversion derivative and warrant liability amounted to expense | 272,059 | |||||||||||
2016 Convertible Promissory Notes [Member] | Private Placement [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Amortization expense | 74,264 | |||||||||||
Amortization of discount to convertible notes | $ 0 | 39,781 | ||||||||||
Description of convertible notes issuance costs | In connection with the Convertible Notes, the Company incurred issuance costs in the amount of $151,915, which included (i) a placement agent cash fee, which was $113,610 for the Convertible Notes issued through June 19, 2017 (ii) the obligation to issue a warrant to the placement agent (the "placement agent warrant") which would have had an exercise price of $2.00 per share of common stock with a total fair value of $4,855 on date of Convertible Note issuance, and (iii) legal expenses of $33,450. | |||||||||||
Warrant term | 5 years | |||||||||||
Issuance costs attributed to common stock purchase warrants | 38,119 | |||||||||||
2017 Convertible Note amendment [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Convertible notes bear interest at fixed rate | 50.00% | 50.00% | ||||||||||
Description of subscription agreement with certain investors | Maturity date was moved up to December 2018 from October 2022 | |||||||||||
Amortization expense | $ 6,574 | 1,286 | ||||||||||
Amortization of discount to convertible notes | $ 27,371 | |||||||||||
Description of convertible notes issuance costs | Prior to the December 2017 amendment, if the Company had raised more than $3,000,000 in an equity financing before October 4, 2022, the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of such securities resulting from either (i) the outstanding principal and accrued interest on the 2017 Convertible Notes divided by $2.25 or (ii) the outstanding principal and accrued interest on the 2017 Convertible Notes multiplied by 1.25, divided by the price paid per security in such financing. The New Warrants would have also become exercisable in conjunction with the 2017 Convertible Notes Qualified Financing. | |||||||||||
Percentage of common stock purchase warrants | 80.00% | |||||||||||
Fair value change of the amended convertible notes carrying value at time of the amendment resulting in note discount | $ 294,615 | 294,615 | $ 294,615 | 294,615 | ||||||||
Loss on convertible notes extinguishment | 8,945 | |||||||||||
November 2017 amendment [Member] | 2016 Convertible Promissory Notes [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Amortization expense | 15,756 | |||||||||||
Amortization of discount to convertible notes | 97,223 | |||||||||||
Fair value change of the amended convertible notes carrying value at time of the amendment resulting in note discount | $ 97,223 | |||||||||||
Discount to debt with gain on convertible note extinguishments | $ 97,223 | |||||||||||
Subscription Agreement [Member] | 2017 Convertible Notes [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Convertible notes bear interest at fixed rate | 8.00% | |||||||||||
Percentage of outstanding voting power | 50.00% | |||||||||||
Description of subscription agreement with certain investors | Pursuant to which the Company, in a private placement (the "Private Placement"), agreed to issue and sell to the Subscribers 8% convertible promissory notes (the "2017 Convertible Notes") and warrants (the "New Warrants") to purchase shares of the Company's capital stock in the event of a conversion event. The number of shares and pricing per share of the New Warrants are based on the underlying conversion event and are exercisable for five years commencing on the triggering conversion event. The subscription agreement, the 2017 Convertible Notes and New Warrants were amended on December 14, 2017 to move up the maturity date of the 2017 Convertible Notes from October 4, 2022 to December 31, 2018, remove subordination provisions and simplify the conversion provision of the 2017 Convertible Notes in the event of a qualified financing as described more fully below, to modify the exercise price of the New Warrants and to increase the authorized subscription amount to $1,500,000. In May 2018, the Board approved an increase in the authorized subscription amount from $1,500,000 to $2,000,000 and extended the offering period from the five month anniversary of the initial closing to the eight month anniversary of the initial closing. The initial closing of the Private Placement was consummated on October 4, 2017, and the Company entered into additional subscription agreements and issued 2017 Convertible Notes in an aggregate principal amount of $1,540,000 to the Subscribers through June 2018 when the Private Placement expired. | |||||||||||
Description of convertible notes issuance costs | Prior to the December 2017 amendment, if the Company had raised more than $3,000,000 in an equity financing before October 4, 2022, the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes would have automatically converted into the securities issued by the Company in such financing based on the greater number of such securities resulting from either (i) the outstanding principal and accrued interest on the 2017 Convertible Notes divided by $2.25 or (ii) the outstanding principal and accrued interest on the 2017 Convertible Notes multiplied by 1.25, divided by the price paid per security in such financing. The New Warrants would have also become exercisable in conjunction with the 2017 Convertible Notes Qualified Financing. | |||||||||||
Percentage of common stock purchase warrants | 80.00% | |||||||||||
November Two Thousand Seventeen [Member] | 2016 Convertible Promissory Notes [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Amortization expense | $ 70,324 | 15,756 | ||||||||||
Amortization of discount to convertible notes | $ 97,223 | |||||||||||
Fair value change of the amended convertible notes carrying value at time of the amendment resulting in note discount | $ 97,223 | |||||||||||
Two Zero One Seven Convertible Note Amendment [Member] | ||||||||||||
Convertible Promissory Notes and Warrant Agreements (Textual) | ||||||||||||
Convertible notes bear interest at fixed rate | 8.00% | |||||||||||
Description of subscription agreement with certain investors | The Company to repay the principal and accrued and unpaid interest thereon on December 31, 2018 (the "2017 Convertible Notes Maturity Date"). If the Company consummates an equity round of financing resulting in more than $3 million in gross proceeds before December 31, 2018 (the "2017 Convertible Notes Qualified Financing"), the outstanding principal and accrued and unpaid interest on the 2017 Convertible Notes shall automatically convert into the securities issued by the Company in the 2017 Convertible Notes Qualified Financing equal to the outstanding principal and accrued interest on the 2017 Convertible Notes divided by 80% of the price per share of the securities issued by the Company in the 2017 Convertible Notes Qualified Financing. | |||||||||||
Amortization expense | $ 19,510 | 1,286 | ||||||||||
Amortization of discount to convertible notes | $ 27,371 | |||||||||||
Fair value change of the amended convertible notes carrying value at time of the amendment resulting in note discount | 294,615 | |||||||||||
Loss on convertible notes extinguishment | $ 8,945 |
Defined Contribution Plan (Deta
Defined Contribution Plan (Details) - USD ($) | Mar. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Defined Contribution Plan (Textual) | |||||
Employees defer compensation, percentage | 100.00% | ||||
Employee deferrals contributions, description | The Company began matching in the fourth quarter of 2017 on deferrals at 100% of deferrals up to 3% of one's contributions and 50% on deferrals over 3%, but not exceeding 5% of one's contributions up through the Restatement. | ||||
Employee contributions, vesting percentage | 100.00% | ||||
Employee deferrals, vesting term | 6 years | ||||
Contributions cost | $ (4,359) | $ 27,000 | $ 7,779 | $ 27,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based services expense | $ 486,120 | $ 76,794 | ||
Research and development [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based services expense | 5,467 | 74,729 | ||
General and administrative [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total stock-based services expense | $ 118,980 | $ 0 | $ 480,653 | $ 2,065 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) - Stock Option Plan [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | ||
Option Indexed to Issuer's Equity [Line Items] | |||
Outstanding, Beginning | 365,716 | ||
Number of Options, Granted | 2,500 | 365,716 | |
Number of Options, Exercised | |||
Number of Options, Forfeited/Cancelled | |||
Outstanding, Ending | 368,216 | 365,716 | |
Number of Options, Vested and exercisable | 368,216 | ||
Weighted Average Exercise Price, Outstanding | |||
Weighted Average Exercise Price, Granted | 5.34 | 0.03 | |
Weighted Average Exercise Price, Exercised | |||
Weighted Average Exercise Price, Forfeited/Cancelled | |||
Weighted Average Exercise Price, Outstanding | 0.07 | ||
Weighted Average Exercise Price, Vested and exercisable | $ 0.07 | ||
Weighted-Average Remaining Contractual Term (years), Outstanding | 8 years 7 months 6 days | 9 years 3 months 19 days | |
Weighted-Average Remaining Contractual Term (years), Vested and exercisable | 8 years 7 months 6 days | ||
Aggregate Intrinsic Value, Outstanding | [1] | $ 908,920 | |
Aggregate Intrinsic Value, Granted | [1] | ||
Aggregate Intrinsic Value, Exercised | [1] | ||
Aggregate Intrinsic Value, Forfeited/Cancelled | [1] | ||
Aggregate Intrinsic Value, Outstanding | [1] | $ 820,862 | $ 908,920 |
Aggregate Intrinsic Value, Vested and exercisable | [1] | $ 820,862 | |
[1] | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of our common stock as of September 30, 2018 and December 31, 2017 of $2.30 and $2.52 per share, respectively. |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Offsetting Assets [Line Items] | |||
Expected stock price volatility | 49.80% | 49.80% | 47.80% |
Expected life of options (years) | 4 years 7 months 13 days | 5 years | 5 years |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Risk free interest rate | 2.85% | 2.80% | 1.90% |
Stock options [Member] | |||
Offsetting Assets [Line Items] | |||
Expected stock price volatility | 49.80% | 49.80% | |
Expected life of options (years) | 5 years 9 months 18 days | 5 years | |
Expected dividend yield | 0.00% | 0.00% | |
Risk free interest rate | 2.80% | 2.90% | |
Stock- option liability [Member] | |||
Offsetting Assets [Line Items] | |||
Expected stock price volatility | 49.80% | ||
Expected life of options (years) | 5 years | ||
Expected dividend yield | 0.00% | ||
Risk free interest rate | 2.50% |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
May 31, 2018 | Feb. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Jun. 30, 2017 | |
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 250,000 | |||||||
Fair value of common stock price per share | $ 2.30 | $ 2.52 | ||||||
Monthly compensation amount | $ 3,000 | |||||||
Grant date fair value | $ 0.034 | |||||||
Option expiry term | 10 years | |||||||
Vested shares | 50,000 | 50,000 | 2.48 | |||||
Vested per share | $ 2.05 | $ 2.30 | $ 2.30 | |||||
Stock-based services expense | $ 115,000 | $ 469,500 | ||||||
Stock-based services expense related to stock-based awards amount | 486,120 | $ 76,794 | ||||||
Unrecognized stock-based compensation | $ 20,000 | |||||||
Vesting period decrease | $ 2.48 | |||||||
Vesting period increase | 0.014 | |||||||
Vesting of common stock | $ 2.52 | |||||||
Stock Options [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 1,533,596 | |||||||
Stock options weighted average exercise price for shares of common stock granted | $ 1.14 | |||||||
Number of Options, Granted | 175,000 | |||||||
Vesting term, description | Vesting commences on January 1, 2019 over a 36 month period. | |||||||
Stock- option liability [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 250,000 | |||||||
Fair value of common stock price per share | $ 2.20 | |||||||
Monthly compensation amount | $ 3,000 | |||||||
Vested shares | 50,000 | |||||||
Vested per share | $ 2.30 | |||||||
Total accrued liability | $ 15,133 | |||||||
General and administrative costs [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Stock-based services expense related to stock-based awards amount | $ 118,980 | $ 0 | $ 480,653 | $ 2,065 | ||||
Minimum [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 1,518,596 | |||||||
Maximum [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 1,533,596 | |||||||
Restricted Stock [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 215,453 | |||||||
Employee Stock Option [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 365,716 | |||||||
Stock award vesting and issued, description | The remaining 50,000 shares of the share commitment under the agreement vested in November 2018. | |||||||
Two Thousand Sixteen And Seventeen Plan [Member] | Minimum [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 1,698,161 | |||||||
Two Thousand Sixteen And Seventeen Plan [Member] | Maximum [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 1,708,596 | |||||||
Two Thousand Sixteen And Seventeen Plan [Member] | Restricted Stock [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 2,292,265 | |||||||
Vested shares | 215,453 | |||||||
Vested per share | $ 0.034 | |||||||
Stock based services expense shares | 11,153 | |||||||
Two Thousand Sixteen And Seventeen Plan [Member] | Employees Directors And Consultants [Member] | ||||||||
Stock-Based Compensation (Textual) | ||||||||
Reserved shares of common stock for issuance | 365,716 | 2,500 | 365,716 | |||||
Stock options weighted average exercise price for shares of common stock granted | $ 5.34 | $ 0.035 | ||||||
Fair value of common stock price per share | 2.48 | |||||||
Grant date fair value | $ 0.035 | $ 0.014 | ||||||
Compensation expense associated with restricted common stock | $ 7,220 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||||
State income tax, net of federal benefit | (7.70%) | (6.50%) | ||
Warrant expense | 9.40% | 10.60% | ||
Disqualified interest and other | 1.00% | 0.90% | ||
Research credits | (1.50%) | (1.20%) | ||
U.S. tax reform | 8.30% | |||
Valuation allowance | 19.80% | 21.90% | ||
Effective tax rate | 0.00% | 0.00% |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Federal and state operating loss carryforwards | $ 1,837,375 | $ 871,371 |
Acquired intangibles | 10,116 | 5,433 |
Accruals | 73,763 | 64,151 |
Convertible notes | 28,863 | 81,904 |
Research and development credit carryforwards | 140,553 | 63,197 |
Stock-based compensation | 24,598 | 19,821 |
Total deferred tax assets | 2,115,268 | 1,105,877 |
Valuation allowance | (2,115,268) | (1,105,877) |
Net deferred tax assets |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 22, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Income Taxes (Textual) | |||||
Effective tax rate | 0.00% | 0.00% | |||
Corporate income tax rate, description | Corporate income taxation, including, but not limited to, the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the deductibility of research and experimental expenditures that will be effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law. | ||||
Reduction in net gross deferred tax assets | $ 420,000 | ||||
Gross deferred tax assets | $ 1,105,877 | $ 2,115,268 | $ 1,105,877 | ||
Valuation allowance | (1,105,877) | (2,115,268) | (1,105,877) | ||
Federal net operating loss carryforwards | 3,032,000 | 6,393,000 | 3,032,000 | ||
Federal research credit carryforwads | 36,000 | 83,000 | 36,000 | ||
State net operating loss carryforwards | 3,032,000 | 6,393,000 | 3,032,000 | ||
State research credit carryforwards | $ 27,000 | $ 57,000 | $ 27,000 | ||
Valuation allowance, description | The deferred tax asset for the convertible notes and the valuation allowance at December 31, 2017 were misstated by $452,845 and have both been revised in the preceding table. The effects of this revision also impacted the effective tax rate reconciliation by increasing the warrant expense percent by 10.6%, decreasing the U.S. tax reform percent by 3.8% and decreasing the valuation allowance percent by 6.8% for the year ended December 31, 2017. | ||||
State and Local Jurisdiction [Member] | |||||
Income Taxes (Textual) | |||||
Operating loss carryforwards, expiration date | Dec. 31, 2031 | ||||
Research credit carryforwards, expiration dat | Dec. 31, 2032 | ||||
Domestic Tax Authority [Member] | |||||
Income Taxes (Textual) | |||||
Operating loss carryforwards, expiration date | Dec. 31, 2036 | ||||
Research credit carryforwards, expiration dat | Dec. 31, 2036 |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) - Warrant [Member] - $ / shares | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |||
Outstanding, Beginning | 2,927,572 | 189,750 | |
Issued | 330,000 | 2,737,822 | 189,750 |
Exercised | |||
Forfeited | |||
Outstanding, Exercisable Ending | 3,257,572 | 2,927,572 | 189,750 |
Exercise Price Per Warrant, Beginning | $ 1.80 | ||
Exercise Price Per Warrant, Issued | $ 3 | ||
Exercise Price Per Warrant, Issued Maximum | 1.80 | 1.80 | |
Exercise Price Per Warrant, Issued Minimum | 3 | ||
Exercise Price Per Warrant, Exercised | |||
Exercise Price Per Warrant, Forfeited | 1.80 | ||
Exercise Price Per Warrant, Exercisable Ending | |||
Weighted Average Exercise Price, Beginning | 1.98 | 1.80 | |
Weighted Average Exercise Price, Issued | 3 | 2 | 1.80 |
Weighted Average Exercise Price, Exercised | |||
Weighted Average Exercise Price, Forfeited | |||
Weighted Average Exercise Price, Exercisable Ending | 2.09 | 1.98 | $ 1.80 |
Maximum [Member] | |||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |||
Exercise Price Per Warrant, Beginning | 3 | ||
Exercise Price Per Warrant, Exercisable Ending | 3 | 1.80 | |
Minimum [Member] | |||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |||
Exercise Price Per Warrant, Beginning | 1.8 | ||
Exercise Price Per Warrant, Exercisable Ending | $ 1.8 | $ 3 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details 1) - Warrant [Member] | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Outstanding, Number Exercisable | 2,927,572 |
Three Exercise Price [Member] | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 3 |
Outstanding, Number of Warrant Shares | 445,200 |
Outstanding, Weighted Average Remaining Contractual life (Years) | 4 years 9 months 18 days |
Outstanding, Number Exercisable | 445,200 |
One Exercise Price [Member] | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 1.80 |
Outstanding, Number of Warrant Shares | 2,482,372 |
Outstanding, Weighted Average Remaining Contractual life (Years) | 3 years 1 month 6 days |
Outstanding, Number Exercisable | 2,482,372 |
Stockholders' Deficit (Detail_2
Stockholders' Deficit (Details Textual) - USD ($) | Dec. 12, 2018 | Oct. 20, 2016 | Dec. 28, 2018 | Jul. 20, 2017 | Nov. 30, 2018 | Dec. 31, 2018 | Nov. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Stockholders' Deficit (Textual) | |||||||||
Common stock authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Common stock, shares issued | 10,036,505 | 9,656,505 | 7,864,994 | ||||||
Common stock, shares outstanding | 10,036,505 | 9,656,505 | 7,864,994 | ||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | ||||||
Purchase agreement, description | The Company issued and sold an aggregate of 170,000 additional Units to the Purchasers, for total gross proceeds to the Company of approximately $425,000 before deducting offering expenses. | ||||||||
Aggregrate sale of shares | 445,200 | ||||||||
Deducting offering expenses | $ 1,538,000 | $ 1,113,000 | |||||||
Maximum offering, units | 4,600,000 | ||||||||
Offering price, per share | $ 2.50 | ||||||||
Warrant issued | 144,005 | ||||||||
Risk free interest rate | 2.85% | 2.80% | 1.90% | ||||||
Expected stock price volatility | 49.80% | 49.80% | 47.80% | ||||||
Expected life of options (years) | 4 years 7 months 13 days | 5 years | 5 years | ||||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | ||||||
Exercise price, per share | $ 2.75 | ||||||||
Liability | $ 5,535,570 | $ 4,614,611 | $ 5,286,596 | ||||||
Legal costs | $ 848,708 | $ 833,470 | $ 553,037 | ||||||
Acquired percentage | 100.00% | ||||||||
Aggregate shares issued of the then-outstanding NeuroOne shares | 3,500,000 | ||||||||
Maximum Shares Issuable | 615,200 | 170,000 | |||||||
Brokerage commission | $ 73,000 | ||||||||
Paulson [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Cash commission, percentage | 12.00% | ||||||||
Exercise price, per share | $ 2.75 | ||||||||
Common Stock [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Net exchanges of shares | 859,976 | ||||||||
Private Placement [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Purchase agreement, description | (i) 1 share (each, a "Share") of common stock and (ii) a warrant to purchase 1 share of common stock at an initial exercise price of $3.00 per share (the "2018 Warrants"). | ||||||||
Maximum offering, units | 4,000,000 | ||||||||
Offering price, per share | $ 2.50 | ||||||||
Warrant issued | 50,520 | ||||||||
Cost of issuance | $ 59,694 | $ 173,067 | |||||||
Cash commission, percentage | 10.00% | 10.00% | |||||||
Exercise price, per share | $ 3.45 | $ 3.45 | |||||||
Common stock purchase price, per share | 10.00% | 10.00% | |||||||
Warrants exercisable, term | 5 years | ||||||||
Liability | $ 9,854 | $ 26,878 | |||||||
Legal costs | 7,340 | $ 62,389 | |||||||
Brokerage commission | $ 42,500 | ||||||||
Warrant exercise price | $ 2.75 | ||||||||
Warrants are committed to be issued | 66,520 | ||||||||
2019 Private Placement [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Maximum offering, units | 4,000,000 | ||||||||
Offering price, per share | $ 2.50 | $ 2.50 | |||||||
Warrant issued | 134,048 | ||||||||
Risk free interest rate | 2.53% | ||||||||
Expected stock price volatility | 49.80% | ||||||||
Expected life of options (years) | 5 years | ||||||||
Expected dividend yield | 0.00% | ||||||||
Cost of issuance | $ 89,622 | ||||||||
Cash commission, percentage | 12.00% | ||||||||
Exercise price, per share | $ 3 | ||||||||
Common stock purchase price, per share | 10.00% | ||||||||
Warrants exercisable, term | 5 years | ||||||||
Liability | $ 13,875 | ||||||||
Legal costs | 2,747 | ||||||||
Maximum Shares Issuable | 160,000 | ||||||||
Gross proceeds from private placement | $ 400,000 | ||||||||
Maximum potential gross proceeds from financing | $ 10,000,000 | ||||||||
Warrant exercise price | $ 3.45 | ||||||||
Broker warrants issuable | 16,000 | ||||||||
Warrants are committed to be issued | 66,520 | ||||||||
Over-Allotment Option [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Maximum offering, units | 600,000 | ||||||||
Subsidiaries [Member] | |||||||||
Stockholders' Deficit (Textual) | |||||||||
Common stock, shares issued | 5,131,514 | ||||||||
Maximum offering, units | 4,000,000 | ||||||||
Exercise price, per share | $ 0.03 | ||||||||
Acquired percentage | 100.00% | ||||||||
Aggregate shares issued of the then-outstanding NeuroOne shares | 6,291,994 | ||||||||
Net exchanges of shares | 1,573,000 | ||||||||
Subscription receivable | $ 9,050 |
Subsequent Events (Details)
Subsequent Events (Details) | 1 Months Ended | 2 Months Ended | 9 Months Ended | |||
Feb. 25, 2019USD ($) | Dec. 31, 2018USD ($)shares | Nov. 30, 2018USD ($)shares | Nov. 30, 2018 | Nov. 14, 2018USD ($) | Sep. 30, 2018USD ($)ft² | |
Subsequent Events (Textual) | ||||||
Unsecured loan | $ 528,000 | $ 283,000 | ||||
Monthly rent | $ 4,763 | |||||
Area of Land | ft² | 5,196 | |||||
Lease expires | Oct. 31, 2019 | |||||
Subsequent Event [Member] | ||||||
Subsequent Events (Textual) | ||||||
Cash gross proceeds | $ 45,000 | |||||
Unsecured loan | $ 100,000 | |||||
Percentage vote of common stock | 5.00% | 5.00% | ||||
Stock options, granted | shares | 175,000 | 175,000 | ||||
Vesting period | 3 years | 3 years | ||||
Gross proceeds | $ 5,000,000 | $ 5,000,000 | ||||
Subsequent Event [Member] | Private Placement [Member] | ||||||
Subsequent Events (Textual) | ||||||
Purchase agreement, description | The Company issued and sold an aggregate of 170,000 additional Units to the Purchasers, for total gross proceeds to the Company of approximately $425,000 before deducting offering expenses. | |||||
Cash commission, description | The Company agreed to pay the brokers a cash commission equal to 10% of the gross proceeds from the sale of the Units sold to investors by such brokers. In addition to the brokers' commission, the Company agreed to issue 5-year warrants to the brokers to purchase an amount of Common Stock equal to 10% of the total amount of shares sold by such brokers in the 2018 Private Placement, at an exercise price of $3.45 per share. Notwithstanding the Company's agreement to pay to brokers the 10% cash commission and issue warrants for 10% of the shares sold in the 2018 Private Placement, the HRA Amendments modified the broker commission arrangements with respect to HRA. HRA was the only broker in the 2018 Private Placement. Pursuant to the Company's engagement letter with HRA (acting through the registered broker-dealer, Corinthian Partners, LLC), as amended in February 2019 by the HRA Amendments, the Company agreed to pay HRA a cash fee equal to 8% of the gross proceeds received by the Company from Prospects in the 2018 Private Placement and to issue warrants exercisable to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 8% of the shares of Common Stock purchased by Prospects in the 2018 Private Placement. | |||||
Subsequent Event [Member] | 2019 Private Placement [Member] | ||||||
Subsequent Events (Textual) | ||||||
HRA capital description | The Company amended its engagement letter with HRA Capital ("HRA"), acting through its affiliate, Corinthian Partners, LLC, each of which are affiliates of one of the Company's greater than 5% stockholders. Pursuant to the original agreement (prior to the amendment), the Company agreed to pay HRA 10% of the gross proceeds (the "HRA Fee") received by the Company in subsequent private placement transactions from investors with whom HRA or Corinthian Partners, LLC had material contact with for purposes of the engagement letter (the "Prospects"), provided such compensation would only be paid in connection with private placement transactions that closed within 12 months of the expiration of the engagement letter (the "Tail Period"). The Company agreed to issue to HRA warrants to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 10% of the shares purchased by Prospects during the Tail Period ("HRA Warrants"). In February 2019, the Company and HRA agreed (i) to extend the Tail Period until June 30, 2019, (ii) to modify the HRA Fee so that HRA is entitled to receive a cash fee equal to 8% of the gross proceeds received by the Company from Prospects in all subsequent private placement transactions and (iii) to modify the HRA Warrants so that they are exercisable to purchase shares of Common Stock (or common stock equivalents) in an amount equal to 8% of the shares of Common Stock purchased by Prospects in subsequent private placements (collectively, the "HRA Amendments"). Upon issuance, the HRA Warrants will be immediately exercisable and expire five years from the closing of the related transaction. | |||||
Gross proceeds from issuance of units | $ 592,500 |